Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — FOREIGN AND COMMONWEALTH AFFAIRS

United States Secretary of State

Mr. Dixon: asked the Secretary of State for Foreign and Commonwealth Affairs what discussions he expects to have with the American Secretary of State.

The Secretary of State for Foreign and Commonwealth Affairs (Mr. James Callaghan): I had discussions with Dr. Kissinger on 8th July. He gave me an account of President Nixon's visit to Moscow, and we had discussions about world economic and energy problems. As usual on such occasions, the content of the discussions must remain confidential.

Mr. Dixon: Did the right hon Gentleman discuss NATO problems? Does he agree that the greatest danger that could face this country would be a withdrawal of American defence forces from Western Europe, and that the best way that we as a nation could ensure that that would not happen would be to pay what in American eyes is our fair contribution to NATO?

Mr. Callaghan: On the last part of the question, we must pay a fair contribution to NATO in our own eyes as well as in the eyes of our allies—not in the eyes of any particular country. On the earlier part, it is vital that the United States should remain a part of our whole alliance in Western Europe, and since I came to office it has been my desire to build this relationship. I hope that to some extent I have succeeded.

Israel

Mr. Body: asked the Secretary of State for Foreign and Commonwealth Affairs whether he has any plans to visit Israel.

Mr. James Callaghan: I have no plans to visit Israel at present.

Mr. Body: If the Foreign Secretary were to go, is he aware that he would find that that country is able to supply us with thousands of tons of citrus fruit? Will be give an assurance that in spite of what is being rumoured in Brussels the housewives of this country will be able to continue to buy their fruit free of any import duty or other kind of food tax? If he cannot give that assurance, will he say how he reconciles his failure to do so with his splendid words to the Council of Ministers on 1st April, when he said there would be no further integration, particularly on food taxes?

Mr. Callaghan: That is clearly a hypothetical question, since I am not going to Israel. In so far as it is not hypothetical, and I might go to Brussels, the answer is that it certainly remains our aim to seek favourable arrangements for the continuation of Israel's agricultural exports to the EEC. My right hon. Friend the Secretary of State for Trade has taken part in a number of discussions on the subject, as has my right hon. Friend the Minister of Agriculture, and the negotiations are continuing. I have no doubt that the stand we have taken on these matters has had an impact on the negotiating mandate.

Mr. Crawshaw: Is my right hon. Friend aware that in order to try to get peace in the Middle East, Israel has given up much territory, which makes it less well able to defend itself should a conflict arise, and that at the present time it feels in need of friends, particularly old friends, like this country? Will my right hon. Friend reconsider his decision not to go to Israel? Such a visit would be extremely welcome to Israel at this time.

Mr. Callaghan: I hope that my failure to visit Israel will not be considered as a lack of friendship in that country. I was there and had discussions with the leaders in January, immediately before the General Election. I also had the


opportunity of seeing Prime Minister Rabin a fortnight ago, at the Socialist International.

Lord Balniel: Presumably the right hon, Gentleman accepts Resolution 242 as being the most likely basis of reaching a settlement between Israel and its neighbouring countries. Does he also accept the interpretation of that resolution put forward by my right hon. Friend the Member for Kinross and West Perth-shire (Sir A. Douglas-Home) at Harrogate?

Mr. Callaghan: I am afraid that I cannot give a glossary of what the right hon. Gentleman said at Harrogate. The Government have taken their own position on Resolution 242, and it is well understood.

Nuclear Tests

Mr. Robin F. Cook: asked the Secretary of State for Foreign and Commonwealth Affairs what representations he has made to the USSR and the USA on a comprehensive underground nuclear test ban, in the light of the recent agreement on a threshold ban only.

Mr. James Callaghan: The treaty signed in Moscow by the United States and the Soviet Union makes clear that the new agreement is a step towards the goal of a comprehensive test ban which both parties have reaffirmed their determination to pursue. The United States and the USSR know that we share that aim.

Mr. Cook: Is my right hon. Friend aware that there is some urgency in this matter, and no room for complacency about the present agreement? Is he aware that the trend in both major Powers is towards more accurate and smaller warheads, and that they would be unlikely to exceed the threshold set for 1976? Is he further aware that since the last partial test ban treaty there have been more tests every year than in the years before it, and therefore will he accept that only a total ban will stop the development of further generations of nuclear weapons? Will he take a British initiative to secure that?

Mr. Callaghan: That is the objective of what I said in my original answer, namely, that we believe—and I understand that the United States and the

USSR share this view—that there is a need for a comprehensive test ban. One of the things standing in the way of that at present is the difficulty of proper international verification. There could be national, but not international, verification, and people would not feel utterly secure until international verification of such tests was possible.

Mr. Teddy Taylor: Is the right hon. Gentleman aware of the concern felt by neighbours of India, following the explosion by that country of a nuclear device? Will he arrange for representations to be made by the Government to India that that kind of nuclear explosion, constituting an extension of the nuclear club, causes a great deal of unrest within the Indian sub-continent?

Mr. Callaghan: The House knows that we were seriously concerned lest the Indian tests should have the effect of undermining the non-proliferation treaty. That has been made clear. When the treaty comes up for review again next year it will be for all of us to examine how we can avoid the spread of nuclear weapons which, although they have passed out of public consciousness for the time being, nevertheless present a most terrible threat to the peoples of the world.

Mr. Bates: Did my right hon. Friend make representations to the Indian Government about the tests?

Mr. Callaghan: Our position was made clear by my right hon. Friend the Minister of State at the CCD conference recently.

Mr. Churchill: When the right hon. Gentleman next meets Mr. Gromyko and the United States Secretary of State, will he register the disappointment of the British people that at their recent meeting President Nixon and Mr. Brezhnev were unable to make progress on an effective agreement to control the deployment of strategic weapons systems, which gravely imperils the future security of all peoples in the world? Will the right hon. Gentleman be prepared to consider an initiative in that direction?

Mr. Callaghan: I shall obviously be willing to consider that, but from my conversations with Dr. Kissinger—I have not had the good fortune to meet Mr.


Gromyko recently—I have no doubt that he is aware of the seriousness of the situation and that he will be working, as I am sure the Soviet Union will be working, to reach agreement on this matter. Both sides know that we shall be happy to take our share in it, but they have the major responsibility.

Rhodesia

Mr. Brocklebank-Fowler: asked the Secretary of State for Foreign and Commonwealth Affairs what discussions he has had with Rhodesian leaders of the African National Council; and if he will make a statement.

Lord Balniel: asked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement about his discussions with delegates of the Rhodesian African National Council.

Mr. Rifkind: asked the Secretary of State for Foreign and Commonwealth Affairs what official contacts he has had, since taking office, with Rhodesian political parties.

Mr. James Callaghan: I met a delegation from the African National Council on 1st July. Its members gave me an account of the situation in Rhodesia as they saw it. I emphasised that Her Majesty's Government will accept no settlement which does not have the support of the African majority.

Mr. Brocklebank-Fowler: I thank the right hon. Gentleman for that statement. Would he care to comment on the announcement by Dr. Gabellah, on his return to Bulawayo, that he had assurances from the British Government that they would take firm steps to deal with the problem of Rhodesia, and an undertaking that the British Government would not have discussions with the Smith régime? Does the right hon. Gentleman think it right in those circumstances that there should be no further discussions between the British Government and the Rhodesian Government to accelerate the chances of bringing about a settlement?

Mr. Callaghan: I do not wish to comment on what Dr Gabellah said, as I do not have his exact words in front of me, and I am not sure that the hon. Gentleman has correctly stated them, although I am sure that it was his desire to do so.

As to the action we are taking, I told Dr. Gabellah and his friends that we had set in motion inside the EEC an examination of the way in which sanctions are being carried out, that we are reporting more breaches of sanctions to the United Nations now, and that we would take account of what they suggest to us in considering our policy towards Rhodesia. It is clear that any effective discussions with Mr. Smith and the régime will have to take place in the context of the representation of all the people in Rhodesia.

Mr. Whitehead: Will my right hon. Friend make it clear that the prospect of talks with Smith and the illegal régime is lessened and not strengthened by the preventive detention of ANC leaders that has again taken place in Rhodesia recently?

Mr. Callaghan: In the Government's opinion it is deplorable that the régime should again have detained Dr. Sithole. I urge them to think again and release him, because he is one of the leaders in Africa who could help effect a settlement under which all the peoples of Rhodesia could have a fair future.

Lord Balniel: Dr. Gabellah and the ANC are definitely reported as having said that the right hon. Gentleman and the British Government would be taking a new initiative in the matter. Is that not so?

Mr. Callaghan: I do not wish to make a statement yet on Her Majesty's Government's policy on the matter.

Mr. Loan Evans: What did the ANC leaders say about the refusal of Mr. Smith's illegal régime to allow Bishop Muzorewa to go to the talks? Did they have anything to say about the continued imprisonment of the leaders of ZANU and ZAPU, Dr. Sithole and Mr. Joshua Nkomo, and whether they should be invited to further talks?

Mr. Callaghan: Yes, Sir, and after the meeting with me they gave a Press conference at which they called for the release of the detained African leaders—not only Dr. Sithole but Mr. Joshua Nkomo.

Mr. Rifkind: Does the right hon. Gentleman realise the opportunity created by the announcement of a Rhodesian general election, although the Rhodesian


Front has not yet been defeated in the Rhodesian Parliament? Does he realise that this is the last opportunity for the British Government to influence moderate non-racial opinion in Rhodesia? Will he announce that the Government would consider recommending the end of sanctions if a non-racial alternative to the Rhodesian Front were elected at the next Rhodesian elections?

Mr. Callaghan: It is a matter of judgment, but I doubt whether statements in the course of an election campaign are likely to meet with much response. Probably we shall not get much advance, if any, until the campaign is over. I have made it clear that in our view the round table conference that Mr. Smith intends to call would not satisfy the Government's views about the way in which these matters should be progressed.

Sir Alec Douglas-Home: I understand the right hon. Gentleman's reticence about an initiative, particularly during a Rhodesian general election. But does he agree that the situation in Mozambique has made it more urgent than ever that the parties in Rhodesia should come together? If he should see an opening, will he take it in order to help them to do so?

Mr. Callaghan: I can give an absolute assurance on the last part of the right hon. Gentleman's question. Everyone who is not completely blind must realise that the situation developing in Mozambique and Angola is altering the internal position in Rhodesia, and will continue to do so. There will be more and more pressure on Rhodesia as the months pass by. I shall take any initiative that is open to me to get the parties together and to try to achieve a solution along the lines of the five principles that the right hon. Gentleman and a previous Labour Government attempted—one that will gain the support of the African people.

Mr. Wall: On a point of order, Mr. Speaker. Question No. 25 is on exactly the same subject.

Mr. Speaker: It was not grouped.

Namibia

Mr. Ioan Evans: asked the Secretary of State for Foreign and Commonwealth

Affairs whether he has completed his review of Southern Africa policy; and, in particular, whether Her Majesty's Government will now accept the 1971 opinion of the International Court on Namibia and will therefore support effective measures at the United Nations to oblige South Africa to withdraw from Namibia.

The Under-Secretary of State for Foreign and Commonwealth Affairs (Miss Joan Lestor): I have nothing to add at this time to the answer my right hon. Friend the Minister of State gave in reply to Questions from my hon. Friend the Member for Aberdare (Mr. Evans) and other hon. Members on 26th June.—[Vol. 875, c. 1538–40.]

Mr. Evans: Does my hon. Friend realise that our hopes and expectations that this Government would make an early review are giving way to a growing disappointment? We can understand that we cannot have the complete review, but would it not be possible to take items from the manifesto, such as a recognition of the International Court decision on Namibia, and have an announcement before the recess?

Miss Lestor: No one in the House is more impatient than I am to reach an early decision on the matter. Much of the problem of Namibia rests on the legal aspects. We are having the whole question of the International Court's judgment examined. Until that examination is completed, it is difficult to deal with other aspects of the Namibia situation separately. Announcements will be made as time goes on. I cannot give a date when we shall be able to make an announcement, but I assure my hon. Friend and others who have shown a great interest in the matter that our policy towards the review and other matters concerning Namibia is being considered with concern and sympathy for the Namibians.

Mr. Russell Johnston: Is the hon. Lady saying that she has no idea of when she may be able to indicate whether the Government accept the 1971 judgment of the court on the status of Namibia? It is extraordinary that she can make no forecast. Have the Government in their possession any evidence of acts of repression within Namibia? If so, what action does the hon. Lady propose in order to


bring this to the attention of the United Nations?

Miss Lestor: I cannot give the House a date—I wish I could—because much of the consideration rests with the Law Officers. I regret that this has taken so long, but it is a complex subject, not something about which one can give an overall decision in two or three weeks. We have been making a detailed review of the whole matter.
With regard to matters of repression and aggression towards Namibians, we have made known our views and our protests. We are sending an observer to the trials which are now taking place involving SWAPO, and we are doing everything in our power to ensure that our protests are known and heeded.

United Nations Secretary-General

Mr. Terry Walker: asked the Secretary of State for Foreign and Commonwealth Affairs what plans lie has to meet the Secretary-General of the United Nations.

The Minister of State for Foreign and Commonwealth Affairs (Mr. David Ennals): My right hon. Friend looks forward to meeting the Secretary-General as soon as this is mutually convenient.

Mr. Walker: It is very important that my right hon. Friend the Secretary of State meets the Secretary-General of the United Nations, because the United Nations has a great part to play in the maintenance of world peace. This has been underlined in the last few days, due to the Cyprus emergency. I hope that my right hon. Friend the Secretary of State will take an early opportunity to meet the Secretary-General.

Mr. Ennals: I assure my hon. Friend that there have been a number of discussions with the Secretary-General. I had a long meeting with him myself at a special session of the General Assembly, and our representatives in New York are in constant touch with the Secretary-General, as is indicated by the number of occasions he has expressed deep appreciation for the rôle of Her Majesty's Government in the United Nations.

Mr. Blaker: When the right hon. Gentleman meets the Secretary-General will he discuss with him the Secretary

General's views about the likely world food situation over the coming decade? Is the right hon. Gentleman aware that the Secretary-General and other people in responsible positions, such as the Director-General of the Food and Agriculture Organisation, have expressed gloomy views about the probability that the world food situation will deteriorate over the coming years? Is he also aware that this is very relevant to the question whether it is likely that in future years we shall be able to buy food more cheaply outside or inside the EEC?

Mr. Ennals: The hon. Gentleman is absolutely right to draw the attention of the House to what is a serious problem. The stocks of food in the world have never been—certainly not in the past 20 years—at a lower level than they are now, and there is also a problem regarding fertilisers. There has been discussion on this matter in the Food and Agriculture Organisation and recently at a meeting of a working party at which we were represented, and it will be a central issue at the World Food Congress which is to take place in November this year, in which we shall play an active part.

Commonwealth (International Rôle)

Mr. Teddy Taylor: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the future rôle of the Commonwealth.

Mr. James Callaghan: The Commonwealth, with its wide membership and its tradition of frank and informal discussion, has an important rôle to play in fostering international understanding and in promoting a constructive and co-operative approach by the world community to present problems. At the same time the Commonwealth association will continue to provide a valuable forum for co-operation in many fields between member countries.

Mr. Taylor: Will the right hon. Gentleman take practical steps further to strengthen the Commonwealth by arranging for the Commonwealth Secretariat to take practical steps to reinvite Pakistan to become a member of the Commonwealth?

Mr. Callaghan: That is a matter for the Commonwealth as a whole. With regard to practical steps that we are taking to strengthen the Commonwealth, the hon. Gentleman may know that there is to be a meeting of Heads of Government on 29th April next year, in Jamaica, and our representatives at the United Nations and other international organisations have been instructed to consult their Commonwealth colleagues on every available occasion where interests are common.

Mr. William Hamilton: Will my right hon. Friend say whether he has any evidence that any member of the Commonwealth wants us to get out of the Common Market? Does he think that relations with Zambia and Tanzania will do other than deteriorate, so long as we have British citizens imprisoned there without trial and without charges made against them for months on end?

Mr. Callaghan: With regard to the first part of my hon. Friend's supplementary question, I have not asked members of the Commonwealth—[Interruption.]—I have not asked them whether they wish us to leave the European Community. That is a matter for the British people, and no one else, to decide. The British people will take this decision. I have naturally inquired, about the impact of the Community, and our entry, upon attitudes of Commonwealth countries, but I would not dream of asking Commonwealth countries whether we should remain a member of the Community, and I hope that hon. Gentlemen would not do so. It is for the British people to decide. They will be given the opportunity so to do.
With regard to the second part of my hon. Friend's supplementary question, our attitude has been made clear by my hon. Friend on a number of occasions.

Mr. MacCormack: Does the right hon. Gentleman agree that the step which the last Government—of which the hon. Member for Glasgow, Cathcart (Mr. Taylor) was a member—took in joining the Common Market was the greatest blow against the whole principle of the Commonwealth that could have been struck?

Mr. Callaghan: There is no doubt that our entry into the the EEC has given a new perspective to a number of Com-

monwealth countries. Some have diversified their trade as a result, and others look to the Community as being a wider means of access for their commodities. Like most of these matters, this truth is many-sided.

European Security and Co-operation

Mr. Sproat: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the latest progress in the Conference on Security and Co-operation in Europe.

Mr. James Callaghan: The conference has made some progress but more still remains to be done. We shall continue to work patiently and constructively with our Allies to obtain satisfactory results in all areas of the conference's work.

Mr. Sproat: When does the right hon. Gentleman see the second stage of the conference coming to an end? Does he believe that the results so far achieved justify a summit meeting, such as the Soviet Union would like? What evidence has he of a more progressive attitude, particularly on the part of the Soviet Union, with regard to confidence-building and military activities with effective machinery for settling disputes and—perhaps most importantly—will he press for a freer movement of people and ideas between East and West?

Mr. Callaghan: With regard to the range of the second stage of the conference, I understand that a six-weeks' break has recently been agreed, and no doubt this will allow time for reflection by the participants. I then expect the conference to proceed well into the autumn. With regard to the level of the third stage, the participants have agreed that this should be decided before the end of the second stage. The level of the third stage depends upon the results that are achieved. Results have already been achieved in some areas, such as the inviolability of frontiers.
With regard to the later point raised by the hon. Gentleman, we have not yet achieved results. We must see how we get on with this before we decide on what level the third stage is to be held.

Mr. Alan Lee Williams: Is my right hon. Friend aware that there is concern about the progress of the so-called


Basket III? Has he discussed with Dr. Kissinger, the question whether Dr. Kissinger or President Nixon tried to see Dr. Sakharov in Moscow?

Mr. Callaghan: It is a little difficult to give straight replies on matters that I discussed with Dr. Kissinger. [Interruption.] I am not the only one concerned. I say to my hon. Friend, in order to try to give him a lead on this, that he may have noticed that the question of Basket III was fully discussed at the Ottawa Conference, when we agreed on the new NATO declaration, and the communiqué contained a number of references to it. My hon. Friend is right to say that there is considerable concern that we should make progress in these matters, and that is the desire of Her Majesty's Government.

Sir D. Dodds-Parker: Will the right hon. Gentleman insist on free movement, as guaranteed under the United Nations Charter of Human Rights? Does he agree that the imprisonment of my constituent, Miss Ballantine is entirely unjustified under that charter?

Mr. Callaghan: I would prefer not to comment on the case of Miss Ballantine at the moment, without looking at the details. As for the point about free movement, we cannot expect to overturn the philosophy and ethos of any of the members of this conference. The phrase that has been used is that there should be ' freer movement". It is a case of defining what that means. That seems to be at least some progress towards the objectives which the Government have in mind.

Portugal (Rhodesian Sanctions)

Mr. R. C. Mitchell: asked the Secretary of State for Foreign and Commonwealth Affairs what discussions he has had with the new Government of Portugal regarding the implementation of the United Nations sanctions resolution on Rhodesia.

Mr. James Callaghan: I have discussed this matter with Dr. Soares.
Despite the economic significance of Rhodesia to Mozambique, I am satisfied that the new Portuguese Government are fully aware of the importance of the issues, and that they will do whatever they can to help.

Mr. Mitchell: Does my right hon. Friend think that the new Government in Portugal will have sufficient control of the new Government in Mozambique to stop up the loophole there? Will he also have talks with the Austrian Government about the alleged sanction-breaking activities of the Austrian State-owned steel company?

Mr. Callaghan: Rhodesia and Mozambique have close economic ties. The Portuguese Government are aware of the difficulties that arise here. I believe that it is their desire to assist our policy in Rhodesia, and I am satisfied that Dr. Soares should want to do so. I have some information about the Austrian matter. Perhaps my hon. Friend will table a Question so that I can give him a proper reply.

Mr. Mitchell: I have been trying to.

Mr. Ronald Bell: If we are to have ideological sanctions, would it not be better if they were directed against Uganda and African nationalist countries which are dictatorships?

Mr. Callaghan: We have to take a clear line on all these issues. I do not disagree with the hon. and learned Member. As for the failure of my hon. Friend the Member for Southampton, Itchen (Mr. Mitchell) to get a Question past the Table, perhaps he and I can correspond on the matter.

East-West Security and Co-operation

Mr. Frank Allaun: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on recent negotiations on East-West security and co-operation and mutual arms reduction.

Mr. James Callaghan: I dealt with the Conference on Security and Co-operation in Europe in my answer to the hon. Member for Aberdeen, South (Mr. Sproat) a few moments ago.
The Vienna negotiations will shortly go into recess until September. The discussions have proceeded steadily. In this field, too, we will continue to work with our Allies for a satisfactory conclusion.

Mr. Allaun: What is Britain doing to secure much better progress in mutual arms reduction? Since it would greatly benefit the economies of the East and the


West, will my right hon. Friend consider supporting the compromise proposal made by the Eastern European countries recently that there should be proportionate reductions in arms, starting next year?

Mr. Callaghan: What the Warsaw Pact countries proposed was that there should be reductions by equal percentages. The North Atlantic Treaty Organisation members have taken the view that these reductions should in the first place be confined to the Soviet Union and American forces, and that they should then be followed by further reductions, involving other members. This is a technical question and it is not one on which I would want to depart from our present policy.

Mr. Scott-Hopkins: Does the right hon. Gentleman not agree that the Soviet Union has been dragging its feet in these negotiations while building up its forces in Eastern Europe to an unprecedented level?

Mr. Callaghan: No, Sir; it is not my impression that the Soviet Union has been dragging its feet. It is perhaps true that it has put more emphasis on concluding the Conference on Security and Co-operation in Europe. These questions of multilateral disarmament are extremely complicated. I believe that there is a genuine desire to examine them on their merits. Everyone knows that it is our desire to lessen the burden on the backs of our people, and I hope that it is the desire of other countries, too.

China

Mr. Adley: asked the Secretary of State for Foreign and Commonwealth Affairs what steps he is taking to develop and foster relations between Her Majesty's Government and the Government of China.

Mr. Ennals: We attach great importance to the maintenance of good relations with the Chinese Government, and yesterday my right hon. Friend opened the Great Britain-China Centre in London. We look forward to continuing contacts at all levels between our two countries.

Mr. Adley: In the light of that answer, is it not a matter of satisfaction that the Chinese Government firmly support the

European Economic Community and Britain's position in it—in contradistinction to the attitude of the USSR? Will the right hon. Gentleman take an early opportunity of talking to the Secretary of State for Defence to see whether positive steps forward may be made on the question of the sale of the Harrier aircraft to the Government of China?

Mr. Ennals: The hon. Gentleman may be in some confusion about the nature of the referendum that has been suggested concerning the Common Market. It is not intended to be a world referendum, asking all nations to decide our future. It will be decided by the people of this country. I can tell the hon. Gentleman that no firm proposals have been put to the Government about the Harrier.

Mr. Roy Hughes: Does my right hon. Friend not agree that both the Conservative and Liberal Parties are prepared for the Chinese Government or any Commonwealth Government to have a say on the question whether we should remain in the Common Market or come out, but they are reluctant to allow the people of this country the final decision?

Mr. Ennals: That is my impression. On a number of occasions I have heard my right hon. Friend the Prime Minister seeking to secure from the Leader of the Opposition an assurance that he believes that the people should have the right to decide this. My right hon. Friend has failed to get a satisfactory answer. We know where we stand. I believe that the British public will demand the right to a say in this matter and will not pay much respect to those parties which believe that those who sit in Westminster are always right.

Republic of Ireland

Mr. Mather: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about relations with the Irish Republic.

The Minister of State for Foreign and Commonwealth Affairs (Mr. Roy Hattersley): Our relations with the Irish Republic are good. It is our wish and intention that they should remain so.

Mr. Mather: Is it right that this country should continue to be taken to


task by the Irish Government at the European Court of Human Rights at Strasboug? Does this not impugn the whole honour of our security forces in Northern Ireland? Has the hon. Gentleman taken any action to press for this hostile motion to be dropped? Does he realise that this action, taken by the previous Irish Government, may greatly damage our relations with the present Irish Government?

Mr. Hattersley: This Government, like their predecessors, have continued vigorously to contest the allegations made by the Government of Ireland. The hon. Gentleman will know that even though the case is before the court there is opportunity for a friendly settlement. We continue to hope that the Irish Government will take that course of action. In the meantime we shall continue our vigorous denial of the allegations.

Mr. Dalyell: In the interests of the success of the Convention in the North, may I ask that our relations with the Irish Government be kept at a low profile?

Mr. Hattersley: There is a good deal to be said for that. I agree with that contention and I hope that my hon. Friend will agree with it too, and act accordingly.

Mr. Goodhart: In view of the widespread concern in Dublin about the course of our negotiations with the rest of the European Community, will the hon. Member consider publishing a White Paper setting out the implications for Anglo-Irish trade if we were to withdraw from the Common Market?

Mr. Hattersley: When the time comes for the British people to decide whether we should remain a member of the Community, a White Paper considering all the implications of withdrawal will be produced. This will deal with our relationships with the Irish Republic.

South Africa

Mr. Trotter: asked the Secretary of State for Foreign and Comonwealth Affairs what official contact he has had with Ministers of the Government of South Africa.

Miss Joan Lestor: So far, none, Sir; but we keep in touch as necessary through our respective representatives in Pretoria and London.

Mr. Trotter: Would it not be as well if the Minister were to convey to the South African Government and to this House the Government's intentions about the Simonstown naval base? Will she explain why instructions were given to the Royal yacht publicly to sail past with a great deal of publicity? Was this not a piece of pure hypocrisy, coming at a time when the base is being used regularly by vessels of the Royal Navy and when those vessels operating on the Beira patrol are regularly serviced at Simonstown? Will the hon. Lady take the opportunity at some future date of explaining to the South African Government the need for the maintenance of the Simonstown base in the interests of the development of British shipping'?

Miss Lestor: As I think the hon. Gentleman knows, the Simonstown Agreement continues in operation. As he must also be aware, the whole question of our defence is under review. If we foresee any changes as a result of that review, and any changes in the Simonstown Agreement, the House will naturally be informed as soon as that takes place.

Oral Answers to Questions — EUROPEAN ECONOMIC COMMUNITY

Middle East

Mr. Luce: asked the Secretary of State for Foreign and Commonwealth Affairs what plans he has to hold coordinated discussions with the EEC Foreign Ministers on the Middle East.

Mr. Hattersley: At a meeting in Bonn on 10th June my right hon. Friend and his colleagues approved proposals for a dialogue with the Arabs elaborated in the political co-operation machinery of the Nine. These proposals envisage the development of economic and technical co-operation between the Europeans and the Arabs, whether or not they are producers of oil.

Mr. Luce: May I take it that the Minister feels that we are more likely to influence progress towards peace in the Middle East by means of a concerted European approach than by acting on our own? Will he say what action the Common Market Powers, as well as the British Government, are taking to influence those Powers taking part in the


Geneva Conference on the Middle East towards a European viewpoint?

Mr. Hattersley: No. I think that the hon. Gentleman misunderstands the intention of the European-Arab dialogue. The intention is to consider a number of mutually important matters concerning, for example, industry, agriculture, raw materials and transport. The dialogue is not concerned with the establishment of a peace settlement, which might in some ways cut across the initiative of Dr. Kissinger. Indeed, when my right hon. Friend gave his approval to the extension of the dialogue, he was specific that nothing done by the Nine should in any way prejudice other peace negotiations. That must remain our policy.

Mr. Faulds: Does my hon. Friend agree that the dialogue must not depend to any degree on the compliance or consent of the United States of America?

Mr. Hattersley: I think that my hon. Friend describes attitudes in this instance in unnecessarily crude terms. Clearly, there must be a proper partnership between the EEC and the United States of America in matters of mutual interest. Clearly, there must be a proper relationship between Members of the EEC. I do not think that a matter of prevention or exclusion comes into such negotiations.

Renegotiation

Mr. Kirk: asked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement on the progress of his talks regarding the renegotiation of the terms of entry into the EEC.

Mr. Silvester: asked the Secretary of State for Foreign and Commonwealth Affairs when he will next discuss the renegotiation of our terms of entry to the EEC with the Council of Ministers

Mr. Roy Hughes: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about the progress of the renegotiation of the terms of entry into the EEC.

Mr. Kenneth Clarke: asked the Secretary of State for Foreign and Commonwealth Affairs whether he will now

make a further statement on the progress of the renegotiations of Great Britain's terms of entry into the European Community.

Mr. James Callaghan: We are pursuing our objectives on several fronts in the appropriate Council meetings. I expect intensive negotiations to get under way in the autumn.

Mr. Kirk: Does the right hon. Gentleman intend his intensive negotiations to be compartmentalised in the four areas that he has singled out, or will he pursue them in parallel? Does the link that he has made between them and other matters at present under discussion within the Community mean that the process will necessarily be slowed up while those other matters are discussed?

Mr. Callaghan: I think that they will proceed in parallel in a compartmentalised direction. [Interruption.] I tried to understand the question, and that was my interpretation of it. With regard to the pace at which negotiations proceed, they certainly cannot hang fire, and it would be reasonable to assume that they will begin to speed up as the autumn leaves begin to fall.

Mr. Roy Hughes: Does my right hon. Friend feel that he should give some more specific details about the timetable of the negotiations? Does he not feel that the negotiations should be concluded within the next 6–12 months? Above all, will he give the House an assurance that this issue will not be fudged, and that the British people will have a clear opportunity to state whether they wish to stay in the Common Market or come out?

Mr. Callaghan: The nature of the timing has still to be decided. I have already given my views on that matter in a personal capacity in so far as I am able to do so. I share my hon. Friend's view that the issue must neither be fudged nor unduly delayed. I think that the question must be clear and capable of a clear answer.

Mr. Silvester: Now that the right hon. Gentleman has had some months of experience of negotiating in Brussels, if he comes to the conclusion that the systems in use in Brussels allow him by continuous negotiation to make gradual improvements, will he accept that position


instead of trying to get one massive agreement simply because that is the only way to refer it to a referendum?

Mr. Callaghan: There were certain objectives contained in the manifesto on which we fought the General Election and on which we became the Government. At a suitable time, and not too distantly, we must come to a conclusion on those objectives and present our conclusion to the British people.

Mr. Jay: In the course of renegotiation, has my right hon. Friend discussed the proposals now going forward from the the Commission to the Council of Ministers of the EEC which, in the words of my right hon. Friend the Secretary of State for Energy, have
policy implications for United Kingdom sovereignty over our indigenous energy resources"?
Will he firmly resist any proposals from the Commission that we should surrender to the EEC our sovereignty over North Sea oil?

Mr. Callaghan: We certainly do not intend to set up State corporations of the kind that are proposed and then to surrender them to some other body.

Mr. Hooson: The answer that the right hon. Gentleman gave to his hon. Friend the Member for Newport (Mr. Hughes) was generalised in the extreme. Will he tell the House in his official capacity, as opposed to his personal capacity, how long he has in mind for renegotiation? Where does the continuous negotiation begin that one can expect between countries within the Treaty of Rome, and where does the renegotiation end? Will he make that position clear?

Mr. Callaghan: These are fair questions and I am bending my mind to them. The Government will have to reach conclusions on these matters. When they have done so—I hope that that will not be too far in the distant future—they will be communicated to the hon. and learned Gentleman and to the House.

Dr. Dickson Mabon: Will my right hon. Friend confirm that in the White Paper which will follow the conclusion of the negotiations there will be, first, a statement on the progress of negotiations and the conclusions thereof, secondly, a statement of the Government's

opinion on the outcome of the negotiations and, thirdly, a statement of the alternative, even though the Government may not wish to recommend it, if we ceased to be a member of the EEC?

Mr. Callaghan: I shall bear these matters in mind. As yet we are rather a long way from preparing a White Paper.

Mr. Kershaw: asked the Secretary of State for Foreign and Commonwealth Affairs what consultation he has had with the United States Government about Great Britain's future in the European Community.

Mr. Hattersley: None, Sir. But as I told my hon. Friend the Member for Hornchurch (Mr. Williams) on 19th June, we are in close and constant touch with the United States Government on matters of common concern, and they are well aware of our position.

Mr. Kershaw: Does the hon. Gentleman agree with the recent statement of his right hon. Friend the Minister of Agriculture, Fisheries and Food that the United States wants us to remain a member of the Community?

Mr. Hattersley: I understand that that was the impression that my right hon. Friend obtained when he was in Washington six weeks ago. That was also the impression that I obtained when I was in Washington a week before. Let me repeat for the third time this afternoon, as we may have to repeat again, that the ultimate decision does not lie in Washington but in Great Britain, and that it is the British people who must decide.

Mr. Skinner: Does my hon. Friend agree that, whilst he may not be able to have consultations with everybody about this matter, as it must finally be decided by the British people it would be as well, in view of the need to get the matter hurried along, for him to consult his right hon. Friend the Secretary of State for Trade, who revealed to the House on Monday that after only a few months' membership of the EEC we are running a current trade deficit of £2,000 million? In view of that deficit, does my hon. Friend agree that there is a need to get on with the job as quickly as possible, so that the Labour Party Conference can frame the appropriate resolution?

Mr. Hattersley: I agree that there is everything to be said for making as speedy progress as is possible with renegotiations. That is in the interests of Great Britain and the rest of the Community. My hon. Friend will understand that as we are negotiating in good faith—which means negotiating with the hope and determination to remain a member of the Community—this is not a matter that can be hurried. I am sure that my hon. Friend would not want a slipshod renegotiation which would end up less fundamental than the manifesto of my party prophesied. There has to be serious and perhaps prolonged negotiation.

Mrs. Winifred Ewing: Is the Minister mindful that the United States Government and other Governments are attending the Law of the Sea Conference at Caracas, which will end in the middle of our recess? Will it not be dangerous for the fishermen of Scotland and England if, after the conference, States do not wait for ratification but make pronouncements claiming large chunks of the sea? For instance, Norway may claim a 50-mile limit. In the Common Market renegotiations we have not taken into account the interests of fishermen. Will the hon. Gentleman alter that situation as from now, with a view to protecting our fishermen?

Mr. Hattersley: I have told the hon. Lady on at least two previous occasions that we have a derogation from the Community on fishing policy until the end of this decade. This question is, therefore, not applicable to EEC business. If the hon. Lady wishes to ask a question about the Law of the Sea Conference, she must put it down.

Mr. Ralph Howell: asked the Secretary of State for Foreign and Commonwealth Affairs whether it has yet been decided in what form the Government intend to consult the British people at the conclusion of the period of renegotiation.

Mr. James Callaghan: No, Sir.

Mr. Howell: Is the Foreign Secretary aware that many people who find it incomprehensible that he is still unable to answer this question believe that the Government have no intention either of holding a referendum or of taking us out

of the EEC, and regard this whole matter as a squalid party political manoeuvre?

Mr. Callaghan: Sir, in the immortal words of one of my predecessors, if the hon. Gentleman believes that, he will believe anything.

Mr. George Cunningham: Will the Foreign Secretary accept that we have all but said that we shall have a referendum on this issue, and that many of us believe that the last element of doubt should be removed by the Government's saying categorically that we shall have a referendum?

Mr. Callaghan: Yes, Sir, I am aware of these considerations, which are very much in our minds now. I undertake that clear answers will be given, perhaps a little sooner than some hon. Gentlemen opposite might like.

Mr. Rippon: I accept that the Foreign Secretary is right when he says that we shall have to wait to see how the situation develops, but will he confirm that while Parliament is still regarded in our constitution as the sovereign representative of the people there could be no decision on a form of referendum until the Government have presented the necessary legislation to Parliament?

Mr. Callaghan: If and when we have proposals for that we shall come forward with them. What is quite clear—I shall say it again for as many times as hon. Gentlemen care to put the Question down—is that it is the British people who will declare on this matter, through the ballot box. When the Government are ready to say more, they will announce their intentions.

Mr. Milne: Does the Foreign Secretary recollect that in an earlier statement on this subject he made clear that in the event of failure to secure the renegotiation terms that Britain had asked for the question of withdrawal from the Community would be on the agenda? Will that question be included in any referendum or in any discussion or consultation with the British people prior to their decision? The question of withdrawal may be the most important factor.

Mr. Callaghan: Yes, Sir, I agree that that is a very important consideration,


which I am examining carefully at the moment.

Sir Alec Douglas-Home: In reply to the supplementary question put by my right hon. and learned Friend the Member for Hexham (Mr. Rippon), the Foreign Secretary said that proposals would be put before the House. He did not quite say—at least, I did not understand him to say—that a referendum would require legislation. Is that not so?

Mr. Callaghan: That is quite right. I did not say that.

Mr. Speaker: Question 37, Mr. Blaker.

Mr. Rippon: May I ask the Foreign Secretary whether that is the case?

Mr. Callaghan: rose—

Mr. Speaker: Order. I have already called Question 37.

Mr. Blaker: asked the Secretary of State for Foreign and Commonwealth Affairs when he next intends to discuss present policy towards the EEC with other European Foreign Ministers.

Mr. Hattersley: My right hon. Friend will be attending a Foreign Ministers' Council in Brussels next week. On 19th July he will have talks in Paris with the French Foreign Minister and on 26th July in London with the Belgian Foreign Minister. Policy towards the EEC will, of course, be covered in these bilateral discussions.

Mr. Blaker: Although truth may be many-sided, is the right hon. Gentleman aware that we hope the Foreign Secretary will not be so—or at least not too much so? Does the right hon. Gentleman recall that the Foreign Secretary said in 1967 that if we were members of the Community it would be healthier for Britain, a gain for Europe and advantageous to the whole world? Will he urge his right hon. Friend to stand four-square on that position?

Mr. Hattersley: I do not think my right hon. Friend needs any urging. My right hon. Friend and all of us on the Government Front Bench are committed to the terms of the manifesto on which we fought the General Election. That manifesto talked about renegotiation of a fundamental sort, and since then we

have talked about that renegotiation being carried out in good faith. That is and remains our policy.

Regional Development Fund

Mr. Tom King: asked the Secretary of State for Foreign and Commonwealth Affairs what steps he is taking in the course of the process of renegotiation to encourage the establishment of a European Regional Fund.

Mr. Hattersley: The Regional Development Fund does not form part of renegotiation. We are willing to take part in further talks on it in the Community. As I told the House on 26th June, discussions about the fund are continuing at official level, aimed at identifying what prospects there are for progress.—[Vol. 875, c. 1570.]

Mr. King: Has the hon. Gentleman seen the speech which was made by one of the British Commissioners, Mr. George Thomson, in which he expressed concern about the delay in setting up the Regional Development Fund and said how helpful it would be if the British Government would make clear that the fund was an essential part of a Community of which Britain remained a member? Why do not the British Government make a statement on those lines now?

Mr. Hattersley: I saw the speech, and I share Mr. Thomson's hope that quick progress will be made with the Regional Development Fund and with matters concerning a regional policy for the Community. The British Government, like any Government renegotiating the terms of membership or simply remaining in the Community, have to take decisions on the fund and regional policy which are in the best interests of the people of this country. Therefore, examination of the fund proposal has to be a detailed and, I fear, protracted business, and there is no alternative to that.

Mr. Spearing: Does my hon. Friend recall that the document on the Regional Development Fund which we recently debated in the House makes quite clear that, whilst the fund is supposed to be auxiliary to member States' own resources, it shall be based on criteria and that its objective shall be towards furthering economic and monetary union? As we have made some reservations on that


policy, should not we make similar reservations on the document which the House has debated?

Mr. Hattersley: We have made clear time after time that we hope and expect that the Community will apply criteria for regional policy which are in conformity with the regional policy that the Government wish and intend to operate. I have no doubt that that will continue to be our policy.

Mr. Churchill: Will the hon. Gentleman explain why the Transport House study group, under the chairmanship of his right hon. Friend the Secretary of State for Industry, said that it was important that the advantages accruing to Britain from Common Market membership should be played down? Will he also advise the House why the Secretary of State for Industry took over as commissar supervising European affairs?

Mr. Hattersley: I am sure that the hon. Gentleman regards that as a serious contribution to the European debate. I do not.

Mr. Fernyhough: Does the Minister agree that one of the principal factors which caused the House to vote in favour of membership of the Common Market was the Regional Development Fund, which would benefit Wales, Scotland and the North-East? That proposal never went through. Does my hon. Friend agree that the country which will have to make the biggest contribution to the fund is Germany, and that Germany has made perfectly clear that she is not prepared to bail Britain out? In those circumstances, in answering the supplementary question put to him by the hon. Member for Stretford (Mr. Churchill), will my hon. Friend say what advantages have so far accrued to Britain as the result of membership of the EEC?

Mr. Hattersley: It is not a matter of bailing Britain out. If the Community is to be effective, the more prosperous areas within the Community must give economic assistance to the least prosperous areas, or the least prosperous areas within member nations. Regional policy makes that possible. The advantages of membership come under two headings—greater political influence and potential greater economic strength.

Mr. Russell Johnston: In his original answer to the hon. Member for Bridgwater (Mr. King), is the Minister saying that there is no reason why agreement on the Regional Development Fund should not be concluded before the conclusion of the renegotiations?

Mr. Hattersley: Some aspects of the Regional Development Fund have to form part of the renegotiation. We have said that we need substantial alterations to the budgetary régime. How much goes into or comes out of the fund has an influence on our attitude towards our budgetary contribution, so the two things are very much connected. On the other hand, it is not the case, as is constantly implied and sometimes written in British newspapers, that because of our renegotiations we are intentionally and wilfully holding up progress in this area. We are not.

CYPRUS

The Secretary of State for Foreign and Commonwealth Affairs (Mr. James Callaghan): I apologise to the House for once again having to make a statement about the situation in Cyprus.
Archbishop Makarios arrived in this country this morning, having spent the night in Malta. I understand that he is in good health and that it is his intention to go on to New York tomorrow to address the Security Council. My right hon. Friend the Prime Minister is seeing him at present and I shall be seeing the Archbishop myself later this afternoon.
In response to a request from the Turkish Government that they should consult with Her Majesty's Government under the terms of Article 4 of the Treaty of Guarantee—a request to which I immediately agreed yesterday—the Turkish Prime Minister and the Turkish Acting Foreign Minister are arriving in this country later today.
The Prime Minister and I will be holding consultations with them this evening. In these talks we will be considering questions concerning our rights and obligations under the Treaty of Guarantee. We shall hope to co-ordinate our views on what action should now be taken to deal with the situation in Cyprus.
We shall also be seeking the views of the Turkish Prime Minister on the question of consultations with the Greek Government.
The Greek Government bear a heavy responsibility for the situation in the island. Under the Treaty of Guarantee they are firmly committeed to respect the independence of the Republic and to assist in the maintenance of stability in the region. It is the duty of the Greek Government to avoid any threat to the independence of Cyprus. Her Majesty's Government are still awaiting the substantive response of the Greek Government to their advice that the officers of the Greek National Guard in Cyprus should be replaced at the earliest possible moment.
My information is that the situation in Cyprus is calmer and that fighting has died down. I have not received any reports that British subjects have suffered any loss or injury. As far as we know, the civil airport at Nicosia, though still closed, is serviceable.

Sir Alec Douglas-Home: The right hon. Gentleman does not need to apologise for making a statement about a matter which potentially could still be very dangerous. I am glad that he is taking the opportunity to consult the Turkish Prime Minister and that they are to meet in this country. I have no doubt that our Ambassador is very much in touch with the Greek Government. It is important that in all these matters we should keep in consultation because, as the Foreign Secretary said, they have a heavy responsibility. I have no further questions to put to the right hon. Gentleman.

Mr. Callaghan: Yes, Sir, the Ambassador in Athens is doing his best to ensure that we get a full and substantive reply from the Greek Government. There has already been a meeting today. I hope to get a reply and, if I do, I shall communicate it to the House.

Mr. Mendelson: Will my right hon. Friend accept that there will be widespread support for the Government's attitude, for the way in which he has advanced the right subjects at the right time and for the way in which our Services co-operated in securing the life of the President of Cyprus?
Now that the Security Council is seized of this matter, will my right hon. Friend consider the possibility that a request may be made by the President of Cyprus for the status quo to be restored. As my right hon. Friend told the House in an earlier statement, the evidence had to be collected. Is it not clearly emerging that the coup was organised by the Greek military Government from the mainland and that there is a good case for Her Majesty's Government supporting a policy through the Security Council aimed at restoring in Cyprus the status quo ante?

Mr. Callaghan: I am obliged to my hon. Friend, and I am sure the whole House would like to know that Archbishop Makarios on arriving in this country this morning expressed his gratitude to the British Forces in Cyprus for their assistance. As regards the second part of my hon. Friend's remarks, I think we should await our conversations today with Archbishop Makarios and with the Turkish Prime Minister before deciding what final action we take in respect of a draft resolution for the Security Council. Archbishop Makarios, as I have already said, intends to go to New York. I have no doubt that it would be in the best interests of stability in the Middle East—and, moreover, would restore the legal position—if Archbishop Makarios was recognised and returned to the island in his full capacity and with his full powers.

Mr. Maurice Macmillan: While recognising, as the Foreign Secretary said, that Archbishop Makarios is still President of the Republic of Cyprus, I should like to ask whether the right hon. Gentleman has made any reference to the Greek Government, not in the way suggested as being partially responsible for the situation but as one of the guarantors and signatories of the Treaty of Guarantee? If the Greek Government, together with the United Kingdom and the Government of Turkey, are responsible under Article 4 of the treaty, in the event of there being little response from the Greek Government when can the second part of Article 4 be fulfilled—namely, common or concerted action not having proved possible?

Mr. Callaghan: Yes, Sir, the representations which are being made by our Ambassador in Athens are related to the


Treaty of Guarantee. The attention of the Greek Government has been drawn not only to Article 4 but to one or two of the other articles. I would prefer not to go further on the action we should take until we have concluded our discussions with those principally concerned, who are arriving tonight. I wish to re-emphasise what I have already said. It is our desire to co-ordinate our policy and actions with the Turkish Government as well as take account of any references which Archbishop Makarios wants to make to the Security Council.

Mr. Dalyell: When my right hon. Friend meets the Turkish Prime Minister, will he show his extreme reluctance to commit the British Army, because if there have to be forces involved many of us would like to see a United Nations commitment? Is it not a fact that one Ireland at a time is enough for the British Army?

Mr. Callaghan: My hon. Friend is looking a little far ahead. There is already a United Nations force in Cyprus.

Mr. Russell Johnston: Does the last part of the Foreign Secretary's statement in which he said that the situation is calmer mean that Mr. Sampson is now in control of the island? Secondly, if this is so, bearing in mind the other questions put by the hon. Member for Penistone (Mr. Mendelson)—and I understand the Foreign Secretary's reluctance to commit himself—what forces does Mr. Sampson have at his disposal?

Mr. Callaghan: I think it is true to say that, if our reports are correct, the police who were supporting Archbishop Makarios are not fighting to the extent they were yesterday. The main forces under Mr. Sampson's control are, I think, the National Guard, which is officered by Greek officers and has about 10,000 men in its ranks. I am not able to say to what extent they have approved of what has been done.

Sir Geoffrey de Freitas: Apart from our independent treaty obligation and the United Nations, is my right hon. Friend aware that those of us who are firmly in support of NATO are much discouraged that from the outset the North Atlantic Council was not used to discuss this Greek aggression on an independent member of the Commonwealth?

Mr. Callaghan: Yes, Sir, there have been a number of channels in which this matter might have been discussed. The Nine members of the Community are making a formal démarche this afternoon to the Greek Government, which I hope will meet with the approval of the whole House. As regards the North Atlantic Treaty, the truth is that the position of Greece at present does not strengthen the North Atlantic Treaty but weakens it.

Sir Frederic Bennett: Is the Foreign Secretary aware that we are all anxious to see President Makarios restored and all agreements under the treaty observed? I hope he will agree that there has been a marked lack of observance of certain treaty provisions so far as the Turkish minority are concerned. I hope that in his conversations he will discuss the future.

Mr. Callaghan: Yes, Sir. The continuation of intercommunal talks in an attempt to settle the problem is vital. But I would not want to assume at the moment that that could be done very quickly.

Mr. Whitehead: Reverting to the North Atlantic Treaty, does my right hon. Friend have any information from the Greek Government as to why they alone were unable to sign the joint NATO statement on Cyprus this afternoon? Has he any information from our diplomatic representatives in Nicosia about the safety of British subjects? Is he aware that many of us have constituents who have been trapped by the fighting? What arrangements will be made to assist them in coming out?

Mr. Callaghan: On the first part of my hon. Friend's question, I have no information. As to the second part of his question, contingency plans have been made. The Foreign Office is in touch with the travel organisations to put them into effect if necessary, and other plans exist in the event of trouble flaring up which meant that Nicosia airport remained closed.

Mr. Townsend: In view of the reports about a certain amount of harassment of United Nations troops, to the best of the right hon. Gentleman's knowledge have any British personnel been so harassed?

Mr. Callaghan: I cannot give a clear answer to that. I have not received any information to that effect. I think that I would have done if it had happened.

Mr. Faulds: Can my right hon. Friend clarify the situation a little, because this is very important? Some of us are a little in the dark about this. Under the Treaty of Guarantee, do our military men in Cyprus have the right, or indeed the duty, to sally forth from the sovereign base to help either the United Nations or the local Cypriot authorities to restore order and legitimacy in that sad country?

Mr. Callaghan: No, Sir. The sovereign base area is different. The Treaty of Guarantee provides that if there is a breach of the provisions Greece, Turkey and the United Kingdom shall consult together with respect to the representations or measures necessary to ensure the observance of those provisions. We are having that consultation today.

PRISONERS (ARTIFICIAL FEEDING)

The Secretary of State for the Home Department (Mr. Roy Jenkins): I will, with permission, Mr. Speaker, make a statement about artificial feeding of prisoners.
On 23rd May, I said that I would review the position regarding compulsory feeding and the traditional view that a prison medical officer would be neglecting his duty if he were not prepared to feed artificially a prisoner on hunger strike, if necessary against his will, in order to preserve his health and life. Distasteful and objectionable though artificial feeding is, it has been judged preferable to allowing the prisoner to die or his health seriously to deteriorate.
I should like to pay tribute to the professional skill and compassion with which members of the prison medical service have discharged their responsibilities in circumstances which I know they have found difficult and distasteful.
The doctor's obligation is to the ethics of his profession and to his duty at common law; he is not required as a matter of prison practice to feed a prisoner artificially against the prisoner's will. Since there has been misunderstanding on this point, I think it is in

the interests of prisoners, the medical profession and the public, that the procedures to be followed in future should leave no room for doubt.
I am advised that the common law duty placed upon persons in charge of a prisoner is to take such steps as are reasonable in the circumstances of each case to preserve the health and the life of the prisoner. In making their decision in respect of any particular case, they must have regard not merely to the dangers likely to flow from the prisoner's refusal of food but also to those likely to flow from the process of forced feeding itself, if it is resorted to, and particularly if it is resisted.
Accordingly, the future practice should. in my view, be that if a prisoner persists in refusing to accept any form of nourishment, the medical officer should first satisfy himself that the prisoner's capacity for rational judgment is unimpaired by illness, mental or physical. If the medical officer is so satisfied, he should seek confirmation of his opinion from an outside consultant. If the consultant confirms the opinion of the prison medical officer, the prisoner should be told that he will continue to receive medical supervision and advise and that food will be made available to him. He should be informed that he will be removed to the prison hospital if and when this is considered appropriate. But it should be made clear to him that there is no rule of prison practice which requires the prison medical officer to resort to artificial feeding, whether by tube or intravenously. Finally, he should be plainly and categorically warned that the consequent and inevitable deterioration in his health may be allowed to continue without medical intervention, unless he specifically requests it.
I have discussed this subject with my right hon. Friends the Secretaries of State for Scotland and Northern Ireland, who have decided that the procedures I have outlined will apply also in Scotland and Northern Ireland.

Sir K. Joseph: Obviously we shall wish to study the right hon. Gentleman's statement, but at first sight this change of policy seems acceptable, provided, as I am sure the right hon. Gentleman intends, that at each stage the position is made abundantly clear to the prisoner concerned.
There are two questions which I wish to put to the right hon. Gentleman. It is not altogether clear from his statement whether any amendment to the prison rules will be involved. I do not think that an amendment will be necessary, but perhaps he will confirm that.
Secondly, assuming that it is made abundantly clear that there is no obligation on the doctor arising from his employment as a prison medical officer to force-feed a prisoner, does the right hon. Gentleman believe that the doctor's own professional position will be tolerable? Has he consulted the General Medical Council about that?

Mr. Jenkins: Dealing with the right hon. Gentleman's first point, I do not think that any change in the prison rules will be necessary. The two relevant ones are 17(1) and 18(3). The first, 17(1), provides that the medical officer shall have the care of the health, mental and physical, of prisoners. The second, 18(3), lays upon him the duty of informing the governor if he suspects a prisoner of having suicidal intentions. I do not think that it is necessary to make any amendment to the prison rules, though if I thought it to be necessary I should lay such an amendment.
Dealing with the right hon. Gentleman's second point, I have consulted Sir John Richardson, the Chairman of the General Medical Council. The House may sense that in making this statement, which is as clear as it can be, I have been beset by a number of medical and legal difficulties. There is the position of common law. There is the fact that I cannot—and no Secretary of State has been able to do so in the past—instruct a medical officer as to exactly how he interprets his clinical duty. But my desire throughout has been to make the position clear. Perhaps the best way to sum it up is that I hope that in future a medical officer confronted with a prisoner who is on hunger strike will treat him in the prison as nearly as possible in the way in which a doctor would treat a free man or woman outside prison.

Dr. Phipps: After the initial examination by a doctor and confirmation by a consultant, is it intended that there will be subsequent examinations so that at some time during a hunger strike it can

be decided that the person on hunger strike is no longer mentally able to determine whether it is for his own good to continue? Will there be continuous examinations?

Mr. Jenkins: I say in my statement that medical supervision and advice as well as food will continue to be available to the prisoner. What my hon. Friend has in mind may conceivably arise at a later stage. But I hope that he will not press that point too much. I hope that it will be clear to a prisoner who is rational at the beginning of this course and takes a rational decision what are likely to be the consequences.

Mr. Beith: Will the right hon. Gentleman accept my welcome for his statement, since I have pressed such a course of action upon him and his predecessor? It removes from prison officers a distasteful task, and it removes from terrorist organisations a potential propaganda weapon which they would not hesitate to use. It will be widely accepted by the general public.
Will the right hon. Gentleman clarify one point? In the event of a medical officer deciding that a prisoner's mental health is impaired by illness, mental or physical, has he any need to consult an outside consultant before proceeding to institute artificial feeding in that situation?

Mr. Jenkins: He has no need to do so in terms of the statement that I have made. If he so decided, I think that he would behave as would a doctor outside a prison. There may be circumstances in which people, for psychological reasons, are unable or do not wish or refuse to eat food. There are certain diseases of that kind. The prison doctor would treat such cases as would a practitioner outside prison dealing with a free person.

Mrs. Renée Short: We warmly welcome the statement made by my right hon. Friend. We are delighted that this barbaric practice is now to disappear from our prison system. May I ask whether my right hon. Friend has noticed the resolution carried at the BMA conference recently which indicates that doctors are very much against forced feeding and that, therefore, he will have the support of the medical profession in this matter?
Will my right hon. Friend also make it possible for prison governors to see that food is left with a prisoner who has decided to refuse food, but in privacy, so that it is left to the prisoner to take food as and when he is able to do so and he is not stood over by prison officers who are trying to compel him to eat by putting psychological pressure on him?

Mr. Jenkins: I am aware of the proceedings of the BMA conference. In particular, I have carefully studied the statement by the Central Ethical Committee of the BMA which was issued on 26th June. I think that what I have said is in accordance with the views of the BMA about the degree of clinical freedom which is right and necessary.
I made it clear in my statement that food would continue to be made available to a prisoner. I assure my hon. Friend that those in the prison service who have been concerned with the difficulties—they can be, and have been, very great—of people on hunger strike are only too anxious to enable them to come off it in the best possible circumstances.

Mr. Norman Fowler: I welcome the statement by the Secretary of State. Does he agree that there is also the question of preventing hunger strikes and that the best way is by making it absolutely clear that no deals will be done with the hunger strikers? Will he take this opportunity of making that point clear now?

Mr. Jenkins: I think that by making the statement I have made known as clearly as I can what I believe will be the future course. I have nothing to add on other matters to what I said to the House when I had a particularly difficult situation to deal with, and I certainly make no apology for the way in which I dealt with it.

AGRICULTURE (EEC MINISTERS' MEETING)

The Minister of Agriculture, Fisheries and Food (Mr. Fred Peart): I should like to inform the House of the main decisions reached by the Council of Ministers (Agriculture) at its meeting of 15th–16th July in Brussels.
The main business before the Council was the difficult situation on the beef

market throughout the Community. The Council agreed on a number of measures designed to strengthen the beef market and to assure reasonable returns to producers. Much the most important of these measures was the authorisation of the system I myself proposed for direct premia to be paid to beef producers on finished cattle. The purpose of these premia is to sustain producers' returns and to offer an incentive to them to market beef cattle in an orderly manner through the autumn and winter.
The maximum rates rise from £9·24 per head in August to £32·34 in February. Arrangements for March and April will be decided following a review in December. The cost will be borne by the member State from August to October, but thereafter Community funds will bear a proportion rising from 50 per cent. in November to 70 per cent. in February.
The premia will be subject to reduction or suspension only if market prices rise far enough to make this desirable. There is no automatic cut-off price. The Government intend to introduce this scheme with effect from 5th August and I shall announce full details as soon as possible.
The effect of these premia will be to assure beef producers of a reasonable return, and to offer a real incentive to phase marketings in such a way as to maintain stable market conditions. They amply fulfil the intention I announced to the House on 26th June of giving our beef producers an assurance that, over a period, their returns would not fall below about £18 per live hundredweight for clean cattle. If the industry responds to the assurance which these premia will provide, average returns over the period till March should substantially exceed this figure. Permanent intervention still remains on option, but these premia represent an alternative way—in my view, a far better one—of supporting the farmer whilst marketing the beef. In this sense they can fairly be said to represent a major change in the Community's beef régime and a new approach to this sector of common agricultural policy. They will sustain producers' returns by direct assistance while enabling consumers to buy beef at prices they can afford.
The Council also decided on special measures to encourage beef consumption


in the Community. First, it noted the Commission's intention of authorising member countries to arrange for the purchase of frozen intervention beef, at reduced prices, by non-profit-making organisations. Secondly, it agreed to authorise member countries, at their discretion, to operate schemes under which those in receipt of social benefits could receive financial assistance towards the cost of buying fresh beef in the shops. The authorised rate of assistance is likely to be about £1 per head per month. Fifty per cent. of the cost would be borne by Community funds. The Government are considering whether to operate this scheme in the United Kingdom. Thirdly, the Council decided to make aid available from Community funds for campaigns to promote consumption of beef and other meat.
Finally, it was decided to suspend temporarily the issue of licences for imports from third countries, except for the quantities covered by the GATT levy-free quota, and to suspend temporary importation for processing and re-export. Licences which have already been issued will enable some beef imports to continue. The Council also noted the Commission's intention to put intervention beef into cans so as to provide a stockpile for use in future shortage and as food aid to the developing peoples of the world. We think that there are opportunities for much of this beef to be canned in the United Kingdom, and I shall be pursuing this with the industry.
I regard the outcome of the Council meeting as very satisfactory for both producers and consumers in this country. It is a good omen for the further negotiations we intend to carry out in this field.

Mr. Jopling: We are grateful to the right hon. Gentleman for coming to the House, so soon after his return from Brussels, to make this statement. We welcome what he said. It is a short-term measure, which is certainly a step in the right direction, to deal with a current crisis. I think that it is fair to point out that his announcement is a consequence of the Government's agreement on 26th June to the motion that was put down by the Opposition. Remembering the promise that the Minister made on 26th June, that returns will not drop below about £18 per live hundredweight for

clean cattle, does he agree that the season is now approaching when the marketings of cattle are heavy and prices tend to be low? If prices were to drop in the next few months, does he agree that it would be possible for farmers, even after they have been paid these premia, to receive less than £18 per live hundredweight? If this happens, how will the right hon. Gentleman honour his promise of 26th June? Could the Minister tell us how much the premia will cost the Government? Will he give an assurance that the premia will apply to cattle sold both live and dead weight?
We note what the Minister said with regard to the consumer subsidy. Will he tell us when we can expect an announcement on that with regard to what our Government intend to do? Can he say how soon people will be able to buy cheap beef in the shops?
The right hon. Gentleman has been telling the media that this has been something of a triumph. Does he realise that the action he has taken today on this scale in the United Kingdom has become necessary only because of his total irresponsibility in removing all beef guarantees from the industry in March and leaving the industry with its confidence at an all-time low?

Mr. Peart: I am surprised that the hon. Member for Westmorland (Mr. Jopling) should blame me for all the ills of a policy which failed when the hon. Gentleman's right hon. Friends were in power. I have always believed that a policy of permanent intervention is good neither for the producer nor for the consumer. When I first went to Brussels I sought to change that. I believe that I was right. If the hon. Member examines what is happening in those countries in the Community who have permanent intervention, he will find out that the policy is not working there. That is why we seek to change it.
I believe that these premia will afford security. I hope that the hon. Member will not talk the industry down with scaremongering. I believe he should accept that most farmers will welcome this as a major step forward.
The hon. Member asked me about Exchequer costs. The total value of the new premia to producers could be up to £40 million direct to the individual


farmers. An increasing proportion, rising to 70 per cent. in February, will be paid from Community funds. The direct cost to the Exchequer could be up to £23 million, or lower if market prices rise sufficiently to allow a reduction in the level of the premia.
I shall be having immediate consultations with my colleagues with regard to cheap beef. I am not now in a position to say that we have accepted the scheme. When we come to a decision I shall report to the House.

Mr. Hooson: The Minister said that this represented a major change in beef policy by the EEC and a new approach. Is that the Government's true view? Do they now find the agricultural policy of the Market to be much more acceptable? How can the Minister represent this arrangement as achieving a price of about £18 per cwt. when the price of fat heifers for example. in Lewes and Maidstone on Monday and Tuesday of this week was £12 per cwt.? A premium of £9 at auction represents for a 9-cwt. beast a premium of £1 per cwt., which will come nowhere near £18 per cwt. for cattle at this kind of price.

Mr. Peart: I believe that when the premia come into operation this will give confidence to the industry. I am sure that farmers, who have praised what I have decided, will accept this, as did the Scottish NFU. I am certain that other British farmers will all accept this. This measure has the approval of the farming community. It will give long-term security.
The hon. Member asked me about the common agricultural policy. This is only part of an improvement of a system in relation to livestock and beef production. The common agricultural policy is a policy which I believe should be changed. I do not like it. I still have my own views on that. I have not altered them in any way. I believe that my task in the renegotiations is to seek a change. I cannot say whether I shall be successful. I suspect that there are some people who do not even want me to be successful.

Mr. Jay: While we must all be thankful that the right hon. Gentleman has saved us from the worst horrors of the intervention system in beef, is it not extraordinary that he can do this only at the

cost of a complete ban on imports from all third countries, which must exclude the cheaper beef which Australia is now both able and willing to send us? Is not the very existence of this ban a proof that there is cheaper food in the world outside the EEC which we could purchase if we were not members of this grotesque organisation?

Mr. Peart: There is no complete ban. Our obligations, and licences issued under the GATT arrangements will continue.
This suspension will last for only a short period. I did not support it. Nevertheless, it was part of an agreement. I accept that when one is negotiating sometimes one has to give and take. I did not support the measure, which is only a temporary one. Indeed it affects only a small amount of beef in relation to exports. I have the figures. Only 30,000 tons were imported in the first six months of this year, and only 16,000 tons were expected in the second half of the year. There are 10,000 GATT quota tons which will be available. Some people still have licences to import meat. Those licences will be fulfilled. I hope that this period will soon be over and that we shall recognise that many of our traditional suppliers should have access to our markets. I have said that with regard to other commodities. I have said it to the Community in relation to Australian sugar. I have also said it, above all, in relation to New Zealand dairy products. I have stated that in the House previously.

Mr. Charles Morrison: Everyone will support the statement of the right hon. Gentleman if it renews confidence in beef production. He must accept that it is he who undermined that confidence. Will he now answer the question? What will he do to live up to his undertaking to ensure a minimum price of £18 per cwt., if the market price is so low that the return to the farmer is less than £18 per cwt., even given the premium now announced?

Mr. Peart: I am surprised that the hon. Member should repeat the statement that I was responsible for the state of the industry. Of course I am not. The industry has faced high inflation. A series of crises in the dairy sector was not dealt with by the right hon. Gentleman, the


former Minister, when in power. Immediately I came to office I went to Brussels. I demanded national aids, which the previous Government should have provided but did not. The permanent intervention system in Europe has not worked. They know it.

Mr. Arthur Lewis: Will the Minister confirm that he had no power to "sell out" in the original instance? It was all due to the action of the right hon. and learned Member for Hexham (Mr. Rippon).
With regard to the social benefits that may accrue, is my right hon. Friend aware that originally it was suggested that the old-age pensioners and those in social need should benefit? We would all accept that. Mention was also made of probably selling the meat to prisons. Can the Minister give us an assurance that prisoners will not come top of the list in the social priority classes?

Mr. Peart: I am not aware that that was said. There are many categories which could be helped. The scheme is optional. The Government have not made a decision. It is optional for any country to operate this scheme.
I have only just arrived from Brussels and on my return I made a speech to the Dairy Federation. I shall now consult my colleagues. When we have reached a conclusion a decision will have to be made. It may well be that we shall accept a scheme, maybe not. I cannot acept it at this stage. I take careful note of what my hon. Friend has said.

Mr. Monro: Would the Minister answer the earlier question whether this applies to auction marts as well as to deadweight sales?

Mr. Peart: The answer is, "Yes."

Mr. Monro: Would the Minister answer the question put by my hon. Friend the Member for Devizes (Mr. Morrison) concerning the total return? If the return is less than £18 per cwt., including the premium, what action will be taken? How will this affect the store sales for the hill and upland farmers in the autumn? This is a critical moment and is the only time when they can sell their beef. Will the Minister take action?

Mr. Peart: I will always look at any section of the industry in difficulties. The premia scheme which I have announced goes from August, September, October through to February, when we shall re-examine the proposals. The headage payment varies. For example, for a time it will be £9·24 per head, going right up, in February, to £32·34. That is a considerable amount of aid going direct to the livestock producer and I think that it is welcomed. After all, it will not only provide realistic aid by injecting capital into the right sections but above all it will give a measure of confidence, which is what affects the market.

Mr. Watt: Is the Minister aware that his statement will remove all confidence from the beef producers of this country?

Mr. Biffen: Which country?

Mr. Watt: My country, anyway. There is now absolutely no floor in the beef market. Will the Minister also answer my question which he did not answer last week—does the proposed premium apply to all finished cattle or only to clean cattle?

Mr. Peart: We are still discussing the actual definition with the management committee. Originally, we proposed all clean cattle, but it may be extended. We shall, of course, know this before we operate the scheme on 5th August. I am amazed that the hon. Gentleman should say that this scheme, which I know has been welcomed by the farming community, will undermine confidence. He must be living in cloud cuckoo land.

Mr. Watt: No—on a farm.

Mr. Roper: Will my right hon. Friend accept that many hon. Members throughout the House will welcome this important step towards a successful renegotiation of the common agricultural policy? Did the Council of Ministers adopt any regulations about the beef industry yesterday? If so, why was my right hon. Friend's Department unable to provide the European Secondary Legislation Committee with draft instruments of those regulations?

Mr. Peart: I was unaware of that. I was the first Minister to appear before the Scrutiny Committee with my staff. If there have been any difficulties, I shall


be delighted to appear again and explain them.

Mr. Body: If we cut out the waffle about this direct premium scheme, does it not simply mean that the taxpayers of this country will be called upon to pay £40 million to subsidise the farmers to prevent that same beef from being eaten by taxpayers? As to the beef from Australia, how does the Minister square this new announcement with the very firm promise in the Labour Party's manifesto that low-cost producers outside Europe would continue to have access to our food market?

Mr. Peart: The total value could be up to £40 million, as I said, but part of this, rising to 70 per cent. in February, will be paid from Community funds. The direct cost to our Exchequer could be about £23 million, but these are rough figures. The main purpose of our renegotiations is a liberalisation of the CAP and the access of which the hon. Gentleman speaks. I spelt out in my last statement what we propose to do and what we did on certain commodities. In principle, we still hold to that.

Mr. Swain: Is my right hon. Friend aware that that part of his statement dealing with the disposal of the beef mountain created by intervention is based on a means test policy with which I hope no one on this side of the House would agree? Is he also aware that the earlier part of his statement referred to a temporary rather than a permanent system? How can the farmers plan for the long term on temporary negotiations which may or may not appear successful in the Council of Ministers?

Mr. Peart: My hon. Friend has a distinctive view about giving cheaper beef to sections of the Community and lower income groups. He may be right. In fact, we in this country operate a scheme for butter, with butter tokens—

Mr. Swain: We should give them the money so that they do not need tokens.

Mr. Peart: My hon. Friend may he right. There are different views on that. On the other hand, it is not easy for anyone to refuse to give meat at reduced prices to those groups who need it—

Mr. Swain: It only helps French farmers.

Mr. Peart: It is not just French farmers who are concerned but beef producers in other countries as well. We have only taken an option. We have not made a decision about this. It will be re-examined in February and March and will be linked with our major renegotiations. I want a longer-term plan for the industry.

Mr. Peter Mills: It would be churlish not to welcome this statement, but would the Minister not agree that the last five or six months have been times of tremendous uncertainty for beef farmers—for some of them, times of disaster—and that his responsibility is that he added to the problem by taking away the intervention system, so he is only paying back something he took away? In the interests of British agriculture, would he consider looking at agriculture in a special review to give the long-term assurances that are so desperately needed?

Mr. Peart: It was the previous Government who destroyed the beef guarantees—

Mr. Mills: The right hon. Gentleman added to the problem.

Mr. Peart: They adopted a system which did not work and is not working in the Community. I believe that what I have done is a far better approach and will offer greater security to the livestock producers.

Mr. Harry Ewing: My right hon. Friend said earlier that he did not support the ban on imports but accepted it nevertheless. Why did he accept it? Was it part of a package? Did he consider using the veto?

Mr. Peart: I believe that it would have been wrong to use the veto at that stage, when I was trying to negotiate a new beef structure. I did not support the ban, which is only temporary and will affect only small quantities. Licences have already been issued, including licences under our GATT obligations.

Mr. Rippon: I join in the congratulations to the right hon. Gentleman on his progress in the negotiations. But would he accept that the criticism of him has been directed to his having abandoned one policy—intervention—before having settled the long-term future? Will he confirm that what he has been negotiating


is a continuing process, fully in accordance with the provisions of the Treaty of Accession? Third, does he agree with what the Prime Minister has always said, that we can only change the CAP from within? Does he agree that we can prevent the Community from dumping surpluses outside the Community at artificially low prices and thus disrupting world trade only because we are a member? Finally, would he answer the question put by so many hon. Members and which he has evaded—what will he do if it is necessary to ensure the minimum guarantee price, that he promised the House to provide, of £18 per live hundredweight?

Mr. Peart: I believe that what I have done will give that security and that the right hon. and learned Gentleman knows it. As for intervention, hon. Members must know that permanent intervention failed. Why did the previous Government not seek to end it and bring in a support system? They, including the right hon. and learned Gentleman, acquiesced in the CAP. I am surprised that he should raise the issue today. I want to change the CAP. My task, as representing a Labour Government, is to do that in the renegotiation. Also—

Mr. Rippon: The right hon. Gentleman represents the British Government.

Mr. Peart: Yes, the British Labour Government. I believe that what the right hon. and learned Gentleman negotiated, especially for New Zealand, was disastrous. Therefore, I have said that I want continued access for New Zealand products to our market. In the Treaty of Accession the right hon. and learned Gentleman curtailed their commodities, and he knows it.

FINANCIAL SECRETARY TO THE TREASURY (PERSONAL STATEMENT)

The Financial Secretary to the Treasury (Dr. John Gilbert): I understand that in my concluding remarks on new Clause 9 during yesterday's debate on the Finance Bill I said that the clause would make no change to the liability for tax of any individual as it merely related to the reporting requirements of the Revenue.
What I meant to say, of course, was that the clause would have no effect with respect to anyone's tax liability for 1974–75. The effect of the clause would, of course, be that the special legislation relating to the taxation of expense allowances and benefits in kind would apply—for the tax year 1975–76 and subsequent years—to employees whose earnings, including expenses and benefits in kind, are at the rate of £5,000 a year or more and, as now, to directors irrespective of their level of earnings.
It was with this in mind that I said yesterday that our introduction of new Clause 9 must not be taken as indicating that, in our view, the raising of the PI ID limit leaves the law in a satisfactory state. We are, as I said, reviewing the whole question of the taxation of benefits in kind. I apologise for inadvertently having misled the House in this manner.

COMPLAINT OF PRIVILEGE

Mr. Tyler: I gave you notice, Mr. Speaker, this morning that I wished to raise a matter of privilege on a communication I have this morning received from the Glasgow Freelance Branch of the National Union of Journalists, which I consider calls into question my freedom of action as a Member of Parliament. This letter represents an implied threat of disciplinary action against me, as a member of the National Union of Journalists, for the way that I cast my vote on an amendment in the Finance Bill on 19th June.
With your permission, Mr. Speaker, and that of the House I shall read the letter and its enclosure:
Dear Colleague, I have received a complaint against you from one of our members, Mr. George Findlay. A copy is enclosed. Our Branch complaints committee has arranged a hearing of the complaint for 2 p.m. on August 2 at the Trades Union Centre, Carlton Place, Glasgow and in accordance with Rule 18 I am inviting you to attend. I am also sending a copy of the complaint to the secretary of the branch to which you belong, in order that your branch may also be represented.
It is signed by the secretary.
The enclosure reads as follows:
Dear Colleague, It is laid down in clause one of the Union Code of Professional Conduct that a member should not act against the interests of the Union. I wish to invoke Rule 18 in regard to a breach of this clause by the


undernoted members of other branches of the Union.
There follows a list which includes my name and the name of my hon. Friend the Member for Hazel Grove (Dr. Winstanley) and my hon. Friend the Member for Isle of Ely (Mr. Freud), among others.
In the House of Commons on June 19, 1974, a motion which, if it had been successful, would have been to the financial interest of the trade union movement as a whole and this Union in particular, was before Parliament. As Members of Parliament all the above named members were entitled to vote on this issue and, as members of this Union, had a clear obligation under the Code of Conduct to support the motion. All the members above named in fact voted against the motion which was lost. It is my contention that members of this Union do not become absolved from their obligations, freely undertaken when they apply for membership, when they become members of other organisations, including the House of Commons. The purpose of this complaint is to attempt to ensure that all members of this Union remember and honour the obligations they have undertaken by becoming members and to eliminate any possible suggestion that certain members of the Union, by virtue of holding office totally unconnected with the Union, are relieved of these obligations. I shall be pleased, therefore, if you will take the necessary steps to set up the procedure for dealing with this complaint as laid down in Rule 18.
My first reaction, Mr. Speaker, at my breakfast table this morning, was to echo the immortal words of my hon. Friend the Member for Rochdale (Mr. Smith)—"Get

stuffed"—but there is, clearly, a very important issue at stake here. It is for that reason, Mr. Speaker, that I should be grateful for your ruling on whether you will grant precedence over the Orders of the Day for consideration of this matter.

Mr. Speaker: If the hon. Member is relying upon written documents, will he please bring them to me.

Letter and enclosure handed in.

Mr. Speaker: I am obliged to the hon. Member for bringing them to me. In accordance with the present practice, I shall rule upon this matter tomorrow.

TOWER OF LONDON (EXPLOSION)

Mr. Cormack: On a point of order, Mr. Speaker. I understand that there has been a most serious explosion at the Tower of London today and that many people have been badly hurt, apparently. As this explosion occurred in the Tower, which is obviously under the control of the Department of the Environment, is it possible for you, Mr. Speaker, to arrange for a statement to be made as soon as possible?

Mr. Speaker: That is not a matter for the Chair.

ABOLITION OF CHIEF RENTS BILL

4.25 p.m.

Mr. Fred Silvester: I beg to move,
That leave be given to bring in a Bill to abolish chief rents at the transfer of title, and for connected purposes
This Bill has a history in that at one time or another a number of hon. Members have tried to tackle this problem. I refer in particular to the hon. Member for Bristol, South (Mr. Cocks), who has sought twice to introduce a Bill for this purpose. Because of their efforts, I think, it is also a Bill which will have a future, because even if this particular measure does not manage to go through all its stages this Session, the Law Commission is currently investigating this matter and has prepared a draft Bill which it hopes to lay by the end of the year.
This is a matter which has concerned particularly the Members who represent Manchester and Bristol constituencies, and it is a matter which other people in other parts of the country find somewhat difficult to understand. A letter was printed in the Manchester Evening News from a person who was suffering from a chief rent in the Manchester area. It read:
I had never heard of such a thing. I lived in Devon, Essex and Kent, and when I tell my friends still living there about it, they think I am pulling their legs.
The chief rent is a charge made upon a person who believes himself to be the owner of a freehold. That comes as a great surprise to many people who have bought a freehold. It is something which even those who have lived with it still find difficult to understand. Worse still, the rent is chargeable against any part of a piece of land, so that if a piece of land is eventually sold for redevelopment and is carved up among different freeholds, that rent can be charged against any one of the freeholders and he will then be liable for all the rent on all the properties. Some of these people have been required to make the collection from the other freeholders.
This is the area which has led to some of the greatest difficulties and the most heart searching. Chief rents first came to my notice in the surgery that I run. In

one case a gentleman who was 80 came in and said that he was very much troubled by having to collect the chief rents of 10 of his neighbours. It is all right if one is young and healthy. It so happened that this gentleman had reasonable neighbours. Some people have not, and many people are forced to collect rents from neighbours who are extremely unwilling to part with them. Some people have been, thereby, forced to pay out of their own pocket the money which they have feared to collect from others.
This situation is capable of remedy by a procedure which was established in 1925, but it does not always work—for two reasons. First, the procedure is complicated and sometimes expensive to perform. Second, even when the procedure is completed and the rent is apportioned between the properties, there sometimes still remains a covenant upon a person to continue the collection.
We are, therefore, faced with a considerable social problem, although it affects only part of this kingdom. The Law Commission has been concerned about this matter for some time and has now put forward two working papers. It has come up with some suggestions which I understand are about to be published. and a draft Bill will be laid by November. I shall say something about that shortly.
The purpose of my Bill is to achieve four things. I wish, first, to stop the creation of new rent charges. This was the purpose of the Bill of the hon. Member for Bristol, South. The working papers have sought to find reasons why such rents should be continued. The Law Commission has listened to many representations. The reasons it set out in its paper are very esoteric, except in two cases. One is that the Commission says that such rents give rise to a lower capital sum for the purchase of the house. There has, however, been no evidence that this is true. Despite all the Law Commission's efforts, it has not been able to produce one shred of evidence, nor have those who have sought to make this point.
Secondly—the Law Commission has a case here—it says that such rents are useful in the enforcement of positive covenants—for example, where there is a group of houses and it is wished to


make some provision for maintenance. I think that that will be overcome by another change in the law which the Law Commission is proposing. For the moment I have included in the Bill an exception to cover that point.
The fact remains that the Law Commission has been unable to find a good reason for retaining the introduction of new rent charges. First the Commission was against it. Its second paper was for it. I am delighted to tell the House that the Commission has now come out against it again and the new Bill will, I understand, seek to extinguish that right, and such a provision is certainly part of my proposed Bill.
The second part of the Bill would seek to extinguish those chief rents which are already existing. Obviously I do not intend to do that in a way which relieves people, without compensation, of a right which they have. That is not likely to be part of the point of view of any Conservative Member.
I would seek to achieve this in two ways. One would be at the transfer of title. When a person buys a house and the legal formalities are in any case going on, that seems to me to be a proper occasion to seek to extinguish and to use the procedures which are available. I make provision in the Bill that the local council may give assistance in those cases where the rent is in excess of £10 and the redemption figure may be rather a burden on those involved.
Secondly, I adopt within my Bill the Law Commission's suggestion that after 60 years existing rent charges should be automatically extinguished. According to the Law Commission's calculations, that procedure would impose no hardship on existing rent owners.
Thirdly—in view of the time I will not go into this—I am seeking to reduce the complications and to simplify the procedure people need follow in order to get

rid of these burdens, and in particular to transfer the operation from the Secretary of State to the town halls, thus making Manchester and Bristol town halls, in particular, busy with these matters rather than leaving them in London.
Fourthly, I seek to introduce a simple system to end the collection of chief rents by one of the owners of the freeholds. I have proposed in the Bill a system which would enable that person to serve notice on the rent owner for the issue of a certificate stating that collection of rents was to end, and suggesting the terms on which it would be done. The rent for which the freeholder would be liable would be the rent which he had paid over the last three years. That would not suit every case, but it would make for a very simple procedure.
I make no pretence that this highly complicated matter would be overcome very quickly, but it is high time for us to make a start. I make no apology for seeking to introduce the Bill at this stage of the Session even knowing, as I do, that the Law Commission will have a Bill ready by the end of the year. My Bill contains things which the Law Commission's Bill will not contain. In any case, we all have many examples of good ideas drifting into the sand because they are not pursued. This is a limited but very important social change which we can remedy very simply if we put our minds to it.

Question put and agreed to.

Bill ordered to be brought in by Mr. Fred Silvester, Mr. John Cope and Mr. Kenneth Marks.

ABOLITION OF CHIEF RENTS

Mr. Fred Silvester accordingly presented a Bill to abolish chief rents at the transfer of title, and for connected purposes: and the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 96.]

Orders of the Day — FINANCE BILL

As amended (in the Committee and in the Standing Committee), further considered.

Clause 10

CORPORATION TAX—OTHER RATES AND FRACTIONS

4.35 p.m.

Mr. David Mitchell: I beg to move Amendment No. 101, in page 6, line 28, leave out from '1973' to 'and' in line 29 and insert:
'and subsequent years shall be three fourths of the Corporation tax rate '.

Mr. Deputy Speaker (Mr. George Thomas): With this we are to take Amendment No. 103, in page 6, line 29, leave out '42' and insert '40'.

Mr. Mitchell: The amendment is designed to help all those small businesses which pay corporation tax. It proposes that the small business rate for corporation tax should be set at three-quarters of the standard rate for large companies. Its effect this year would be that, instead of increasing corporation tax for small businesses by 2 per cent. from 40 per cent. to 42 per cent., it would reduce it by 1 per cent. from 40 per cent. to 39 per cent.
As happened yesterday, we have given to the Government a certain sense of choice. They will see that, very helpfully, Amendment No. 103 is designed simply to retain the small business corporation tax rate at 40 per cent.
This matter is of considerable importance, for 93 per cent. of companies are small businesses. I declare my interest, along with many others and, I hope, my understanding of some of the problems which face small companies.
I ask the House to consider two principal points. There is, first, the special contribution to the national economy which comes from the smaller businesses and the vast potential there is for increasing it if only we give them the sinews—the working capital—and the incentive with which to do it. There are, secondly, the very acute financial

problems which affect the small business sector at present.
My colleagues and I want to see the release of the dynamism, vigour and productive potential of the small business sector. It is more inventive than larger firms. Research shows that 80 per cent. of inventions come from small businesses or people acting on their own. It is better at innovation, because change is disproportionately expensive for a large organisation. It makes better use of national resources entrusted to it than does any other sector of the economy.
I will forbear from calling the frown of concern to the face of the Chief Secretary by mentioning the return on investment in the nationalised sector. That would be a rather unpleasant subject to intrude into the discussion. For the 300 largest companies in the country, the return pre-tax and not accounting for inflation is 14·6 per cent., whereas a search from Samuels and Smythe has shown that the average yield of smaller companies is 18·6 per cent. Thus, there is a substantially better use of national resources in the case of these companies.
Smaller business have a special rôle in the economy because they provide so much of the competition which I regard as the most effective price cutter ever invented by anybody in economics or politics.
These companies are the seed corn from which the bigger companies of the future will grow. Therefore, I do not think that there will be any disagreement across the Floor of the House about the first of my principal points.
I turn now to consider what is preventing small businesses from developing their full potential and making their full contribution to the national economy. It is the acute cash flow problem which faces them. There are three main reasons why it is so acute at present. The first is inflation. I do not blame the Government for inflation, for it has been growing for a considerable time.
But the reality is that because of inflation, to do the same volume of business substantially higher working capital is required, and it is fair to say that the rate of inflation is accelerating at the present time and that is accelerating, in direct proportion, the amount of working capital required by these businesses.


Secondly, there is growth. Because companies are doing a bigger volume of business—something which the Government very much desire and which the country needs—even more working capital is required. At the time when this working capital is required we find that price and profit margins are restricted, so that the producer cannot get from the market the additional working capital he needs. As the Bolton Committee showed, this sector of the community relies for its working capital on plough back and retention of profits. Therefore, if we are to help these companies and they cannot increase their prices, help must be given by reducing taxation.
The judgment of the Chancellor of the Exchequer in his Budget was to increase the tax on this group of companies by 2 per cent. at the precise time when they are so acutely short of working capital. This amendment suggests that, far from increasing taxation, we should be encouraging investment and production and should therefore be reducing taxation so as to ensure that sufficient working capital is available in these companies.
As to the cost, I estimate—and I believe the Chief Secretary will agree with me—that to reduce corporation tax from 40 to 39 per cent., which is what is, in effect, proposed here, would cost about £7 million.

The Chief Secretary to the Treasury (Mr. Joel Barnett): indicated dissent.

Mr. Mitchell: If the hon. Gentleman does not agree I shall be very interested to hear his explanation. I believe that I can prove the figure I have given to the House. Certainly, where we would seek to make this reduction the Government would seek to increase the tax.
There is, however, one other perhaps worse aspect. The Government have increased the tax on large companies from 50 to 52 per cent., which is an increase of 4 per cent. in their corporation tax liability. But for small companies, which have greater need, the proportionate increase is greater. Instead of putting it up by 4 per cent. the increase for the smaller business is 5 per cent.—a point which the House should take into account.
I must express my astonishment that the Minister responsible for small

businesses in the Department of Industry is not here for this discussion. Moreover, he did not even come into the Chamber to sit on the Front Bench to listen to our discussion on the subject of small businesses last night. Perhaps one of the hon. Members sitting on the Government Front Bench would like to show his interest in small businesses by finding the Minister responsible for small businesses and bringing him into the Chamber. He is not sick. He is able to vote. He has not been nodded through the Lobby. Is there any reason why he should not come here to hear what we have to say? Perhaps he might even wish to go so far as to make a contribution to the debate. He might like to tell us his views about this. So many of the deputations which have waited upon him have been told, "Of course, I am a small business man at heart. I am entirely with you in all you seek to do, but those dreadful civil servants prevent me from doing what I would like to do." The hon. Gentleman who has responsibility in political terms for decision making should be sitting here taking his medicine or giving us the benefit of his advice this afternoon.

Sir John Hall: Would not my hon. Friend agree that to ask that the Minister concerned should be here is carrying masochism too far?

4.45 p.m.

Mr. Mitchell: Yes. I should like to say a word about Budget arithmetic since I know that this causes the Chief Secretary some concern. We on this side of the House have saved the Government some £10 million of expenditure which would have been spent on retrospective payments to trade unions. I feel that that £10 million would be much better spent on the productive potential of the smaller business sector of the economy.
If I may put this in the national context for a moment, the Government fear a slow down in the economy. We have been told that next week the Chancellor of the Exchequer will come to this House to announce certain reflationary measures. One of the reasons why those measures have become necessary is the increase in corporation tax on the business sector, preventing it from producing at the pace at which it should and would have produced. Therefore, we are helping the Government. But there is another reason


of which I hope the Chief Secretary to the Treasury is aware—that very small businesses today are holding back from investment projects because they are very worried about the proposed wealth tax which the Government have announced they are to introduce. The Government have left us in a state of total uncertainty as to how this will affect companies and those who invest in businesses.
If we are to have a capital levy of this kind, surely the Chief Secretary is aware that any business man facing a decision on whether he should extend his borrowing or seek to tie up money by investing it in new plant and equipment will say to himself, "I had better not do it because I do not know how much I shall have to contribute to the capital levy the Government have promised in the autumn Budget". Unfortunately, that is an added reason for the economy beginning to run down at the present time. The national interest demands that there should be a boost to production. With respect to some of my hon. Friends who may take another view, I would stress a boost to production rather than to consumption. for that should be the basis of any measures which the Government may take at the present time.
I say to the Government, give small businesses the incentives. Give them the wherewithal to do it and they will succeed in producing the increased wealth that this country so desperately needs.

Mr. William Clark: I wish to support my hon. Friend the Member for Basingstoke (Mr. Mitchell). I believe that it would be agreed in all parts of the House that at every possible opportunity he champions the cause of the small business man. I cannot understand the Labour Government. They do not seem to be living up to their philosophy. Here we are talking about small business men. It is sometimes said, I believe quite wrongly, that the Conservative Party is the party for industry and the rest of big business and so on. Here the Conservative Opposition—and I am delighted that we should have the support of the Liberals—are championing the cause of the small business man.
It is true that the Government are to be congratulated in that they have given a small measure of relief to small businesses. At the Committee stage we

were delighted that on the instigation of an Opposition amendment the Government saw the wisdom of increasing the limit of liability for capital gains for small businesses, so that on retirement the amount was increased from £10,000 to £20,000. For that we were most grateful. All we are asking here is for some relief. some assistance for the small business.
I do not want to rehearse my hon. Friend's arguments. I know that the Chief Secretary, with his professional expertise and experience, knows it to be a fact that small businesses are facing a cash flow problem. Apart from the fears that my hon. Friend has raised about this so-called wealth tax or gift tax, call it what one will, the companies are suffering cash flow problems, and one thing which must always be remembered when comparing big businesses with small businesses is that whenever there is a credit squeeze the impact always falls more heavily on the small business. With a bank squeeze big companies can, by and large, ride out the trouble, but small companies cannot.
We now come to the question of corporation tax on small businesses. As my hon. Friend the Member for Basingstoke (Mr. Mitchell) pointed out, the proportionate increase for big businesses is smaller than for small businesses. On that ground alone the Chief Secretary should think again and do his arithmetic afresh, and I know that he is a very good mathematician. My amendment is a little more modest than that of my hon. Friend the Member for Basingstoke. It would cost the Revenue less than would my hon. Friend's amendment. In Committee an amendment to lower the rate of corporation tax to 40 per cent. from 42 per cent.—which, alas, we lost by one vote, but which situation we might remedy in a few moments—would have cost the Revenue, we were told, £9 million. I would have thought that was a small enough sum in view of what it would mean for this vital section of industry. With its working proprietors, this section is, by and large, more efficient than the large company sector with all its management and corporate structure.

Sir Harmar Nicholls: When my hon. Friend spoke of bringing down the rate of corporation tax to 40 per cent. he should bear in mind that it


is not yet 42 per cent. Surely it is a matter of asking the Government not to increase it. My hon. Friend should not use words which give the impression that the Government are giving something back. The amendment in the name of my hon. Friend the Member for Basingstoke (Mr. Mitchell) would reduce the figure to 39 per cent., which we estimate would cost £7 million.

Mr. Clark: I accept what my hon. Friend says. If we want to compromise, however, let us leave it at 40 per cent.
There is an anomaly in the way in which corporation tax affects small organisations. Housing associations, building societies and provident societies are subject to a rate of 40 per cent. Alas, the trustee savings banks, which again concerns the small man, do not pay corporation tax at the lower rate.
I understand that you did not select Amendment No. 103, Mr. Deputy Speaker, because it was out of order, and in view of that you would no doubt prefer me not to refer to it. Nevertheless, I should be most grateful for a categorical assurance, similar to the one given yesterday about building societies and pension funds, that in the next Finance Bill provision will be made to include trustee savings banks. That would need an amendment to Section 96 of the 1972 Act.

Sir Raymond Gower: I understood the Chair to indicate that we were taking Amendment No. 103 with an earlier one. My hon. Friend says it is out of order.

Mr. Deputy Speaker: We already have one amendment before the House, and with it we are discussing another. The hon. Member for Croydon, South (Mr. Clark) ruled his amendment out of order, I did not.

Mr. Clark: I beg your pardon, Mr. Deputy Speaker. I had intended to say Amendment No. 102, which was not selected. This is, if you like, another personal statement that I have inadvertently misled the House.
Small businesses are suffering a cash flow problem. We need not go into the arguments about the three-day week and whether it was right or wrong, but these

businesses suffered as a result of it and they are also suffering from inflation. A further problem for them will be accelerated or advance corporation tax. Many close companies are forced to declare a dividend. That was perfectly all right under the imputation system when there was freedom of dividend payments, but with dividend limitation the imputation system will hit small companies very hard. That, coupled with 50 per cent. advance corporation tax, serves only to aggravate their cash flow problem.
I appeal to the Chief Secretary to accept the cheaper of the two amendments which, as my hon. Friend the Member for Peterborough (Sir H. Nicholls) pointed out, involves not reducing corporation tax but leaving it at its present level. The amendment in the name of my hon. Friend the Member for Basingstoke would mean a reduction. The Chief Secretary must realise that the small business is the backbone of the country and we must do all we can to foster it and see that it is not penalised by taxation or in any other way.

Mr. John Pardoe: Yesterday in the course of our discussions on small businesses we extended the lower rate of corporation tax to more such companies by redefining the term "small company". In the Budget the Chancellor proposed to raise corporation tax from 50 per cent. to 52 per cent. for large companies and from 40 per cent. to 42 per cent. for small companies. In Committee the Government claimed that they were maintaining the differential at 10 per cent., and by one sort of mathematics they are, but by another they are not. There is a 4 per cent. increase, as the Chief Secretary admitted, for large companies, but a 5 per cent. increase for small companies.
The question today is whether we should reduce the rate for small companies, whether that is a suitable priority and whether it is essential. I hope that the Chief Secretary will give some indication of the cost. In Committee, he said that the cost of the amendment on the old base was £9 million compared with £45 million which was the total relief for small companies. Of course, yesterday's amendment, which will cost £15 million, widens the base and so already there is now total relief for small


companies of about £60 million even without the amendment we are now discussing. I want to know what the amendment would add to the total cost.
My inclination at this stage is to say that small companies this year do not deserve two bites of the cherry when one might well suffice. I accept immediately all the arguments about company liquidity, particularly of small companies, and the problems they face. I do not intend to make a detailed analysis of company liquidity now because that issue will arise on the next amendment. However, we have already done something fairly substantial for small companies in widening the definition.

Mr. David Mitchell: What was done yesterday does not affect the broad range of small businesses, which are suffering from a shortage of working capital. Yesterday's amendment will affect only the small number of firms which will now be added to the group of "small businesses", and if the hon. Member wishes to help all small businesses my amendment is, if anything, of greater importance.

Mr. Pardoe: I did not take part in the debate yesterday although I was present throughout. I did not hear then any such remarks that the amendment was not wholly helpful. Yesterday the whole case was that it was essential that we made the amendment which would be a splendid thing for small companies. Now I understand the Conservatives to say that what we did yesterday was not significant.
I think that it was very significant, and that it was a substantial help to a larger section of small companies than would otherwise have been helped.
There is already a differential. It is only a question of whether we think that the extension of the differential should be a high priority for us today. I regard the advance corporation tax as far more important. Of course, it costs far more money as well. I am by no means convinced at this stage that small companies are entitled this year, with all the other claims that face us, to two bites of the cherry.

5.0 p.m.

Mr. R. J. Maxwell-Hyslop: As my hon. Friend the Member for Basingstoke (Mr. Mitchell) has pointed out, in a time of inflation a business needs an increasing amount of working capital merely to sustain the same volume of business. Additional working capital can be obtained in one of two ways. If it is obtained by borrowing, interest charges must go on to the price of the merchandise and so be paid by the consumer. The second way is to put up the price paid by the consumer, so that the cash flow from sales generates the increase in working capital needed purely to sustain the same volume of business at increasing unit costs.
If there is an increase in corporation tax which results in a reduction in the cash in hand of a business, large or small, this increases still further the amount of extra capital that must be raised either by borrowing or by increasing prices. It is, therefore, the purchaser of the goods or services of that business who ends up by paying the increased corporation tax. It is a fallacy to believe that the proprietors or shareholders of the small business concerned pay. Under inflationary conditions, that is not so.
Amendment No. 101 tends towards reducing the acceleration in general price levels, which I understand is entirely compatible with the policy of both Front Benches. Set against the very small loss in revenue to the Exchequer, if the amendment is passed, is the unchallengeable fact that it will make a definite, if small, contribution to stabilising the cost of living and sustaining the quantum of employment.
The financial stresses on small businesses, not only from inflation in general but from inflation in taxation in particular, including inflation of rates and water charges, are burdens which can become unendurable. When the burdens on a small business become unendurable, either it goes out of business, with the loss of employment that that brings to the community, or it sells out to a larger competitor. When that happens to a large business, it is known as a take over. It is just the same in the case of a small business. If the Labour Party claims to be opposed to take overs, it must be opposed


to measures which bring about the economic conditions in which take overs are unavoidable.
On the summation of those grounds, each of which is individually valid, I hope that the Treasury Bench will welcome the amendment. Whether it does or does not, I hope that the House will pass the amendment.

Mr. Deputy Speaker (Mr. George Thomas): Sir Robert Redmond. I am sorry. I call Mr. Redmond.

Mr. Robert Redmond: After that, Mr. Deputy Speaker, I think that you would not wish me to repeat the arguments I used on new Clause 14 last night, although many of them are equally relevant.
I must take this early opportunity to express sympathy with the Chief Secretary to the Treasury. We know that he has sympathy with small firms and understands their problems. He had to do some special pleading last night, working to a brief in which he did not honestly believe. It is a pity that he does not run a seminar for the Lobby fodder that should be sitting behind him, because his hon. Friends might learn something.
The most important thing to do in relation to the amendment is to refute the charges made by the Chancellor of the Exchequer last night, when he accused the Opposition of being irresponsible. What is happening is that those who are interested in the welfare of small businesses are furthering their interest. What heaven-sent right has the Chancellor to say that we are adding to his borrowing requirement? Why is it so sacred and pure for the Government to be able to take, and try to control, the money earned by industry and leave industry to borrow from the banks? I do not see how those two things add up.
Anyone would think that the Government were able to look after the money better than the man whose future depended on it and, judging by what the Chancellor said last night, that if we reduce corporation tax we are ensuring that the directors and proprietors of small businesses go off on a great binge and spend the money quickly.
I have been in the House for four years, but before that I was in small firms in industry and in various forms of public

life for as long as I can remember. I have served in many organisations connected with local government and in other public bodies. I have never yet met that paragon of virtue who can spend other people's money more efficiently than he can spend his own. Certainly, the present Chancellor, who has said that he never saves any money himself, is not that paragon. The people running their private businesses are much nearer to being paragons than the Chancellor or probably any member of the present Government.

Mr. John Cope: We have agreed in previous debates on the general advantages to the economy of small businesses. I think that even the Chief Secretary has agreed with us. Those advantages include their flexibility and responsiveness to consumer demand and their better labour relations. They are better to work for and deal with.
We have also agreed that one of the disadvantages of the imputation system of corporation tax is that the system is more difficult for small businesses, which do not as a rule distribute much of their profits. It is the clauses dealing with the small business rate that are the way in which the House and Governments—the previous Government in particular, but also this Government by implication, is not attempting to alter the system—deal with the problem.
No doubt, we shall hear again from the Chief Secretary the argument that the amendment will benefit 94 per cent. of companies, as a result of our amendment last night. But it is not that 94 per cent. that is the relevant figure, because it equates large companies such as ICI with the smallest companies and gives one unit to each in calculating the percentage. The interesting thing is what proportion of corporation tax is collected from companies paying the small companies rate. I do not know what that proportion is, but I would be surprised if it amounts to as much as 20 per cent. of the amount of corporation tax collected.
No doubt we shall also be told that this proposal will not benefit small businesses but businesses with small profits. This is an argument which the Chief Secretary has used previously and that is presumably why he is not listening now—

Mr. David Mitchell: Not only is the Minister not listening to my hon. Friend's question, but the Whip who went out to fetch the Minister responsible for small businesses has returned empty-handed.

Mr. Cope: How nice to have one's speeches rewarded in the way in which my hon. Friend has just been rewarded by the arrival of the Minister.
Of course the amendment benefits all businesses with small profits, but that is not an argument against it. Would the Chief Secretary prefer to help small businesses with large profits? If so, a different amendment would be necessary. Perhaps he wants to clobber large businesses with small profits. Perhaps that is what lies behind his objection to the amendment. If that is his intention, all he will do is succeed in driving those businesses to perhaps even smaller profits and perhaps into the hands of the Secretary of State for Industry.
No doubt the Chief Secretary will also argue that the proposal helps small investment companies and others of the kind which he probably regards as less desirable than small trading companies. Of course, if small investment companies and the like have profits within the bracket, they will be helped. But that is not a criticism of the amendment. It may be a criticism of the system under which we help small companies, but it is not a criticism of the amendment, which modifies that system.
In the amendment—I am talking about the amendment moved by my hon. Friend the Member for Basingstoke—we have argued not only that the rate should be brought down but that it should be put on a regular basis, that is, it should be three-fourths of the main rate of corporation tax. It is important that it should he expressed as a proportion in this way, not merely as a rate. We have seen this year that when it is expressed as a rate the Government and the Chief Secretary can come to the House and propose a 5 per cent. increase in the bill for corporation tax for small companies, but only a 4 per cent. increase for large companies. It is the amount of corporation tax which they have to pay which matters to the small companies, not the fact that there is still a 10 per cent. difference in the rates paid by large and small companies.
I also suspect that we shall hear much from the Chief Secretary about the cost

of the amendment and its effect on demand. I am not sure how quick the effect on demand would be, but the amendment puts money into an important part of the industrial sector. I am not sure what the cost of the amendment will be. We altered arrangements last night and that must have an effect on the cost of the amendment, but I suppose that the cost arising from last night's alteration and the proposal we are now discussing might amount to £35 million, which I do not think would be out of the way.
It is less than one-fifth of the amount by which the Treasury got the estimate of corporation tax yield wrong last year. I am not sure how accurate the Treasury sums are this year, but the Treasury's figures will surely not come down to the sort of costs involved in the amendment. The cost is also, incidentally, less than 5 per cent. of the amount by which corporation tax will increase this year, even if the Bill proposed no changes to the rates. The total corporation tax yield would still increase by 20 times the amount dealt with in the amendment, which is also rather less than the amount which the Minister of Agriculture was dispensing from the Dispatch Box earlier this afternoon. I would not like it to be thought that I am against what the Minister of Agriculture announced earlier this afternoon, but this is not the moment to comment on it. I merely draw the attention of the House to the comparison of the two sums, the cost of what we are proposing and the total which the Minister of Agriculture is to dispense—

5.15 p.m.

Mr. Peter Rost: With regard to the question of the cost to the Revenue, does not my hon. Friend agree that there is a viable argument which suggests that it would not cost the Treasury anything, except in the first year, simply because if small companies are allowed to retain more of their profits they will grow more quickly and fiscal drag will enable the Revenue to collect much greater taxation in future years?

Mr. Cope: My hon. Friend is absolutely right with regard to the future, but we are concerned with this immediate year. It is precisely the dynamism of small companies which would lead to the


effect to which my hon. Friend refers. We hope to give encouragement to small companies by means of the amendment.

Mr. Geoffrey Finsberg: I lend support to the amendment. I am sorry that my distinguished constituent, the hon. Member for Cornwall, North (Mr. Pardoe)—who is one of many distinguished constituents whom I represent—took a rather disquieting view of the situation. I would have thought that if he genuinely believes in small businesses and believes that if they are allowed to flourish they will become the big businesses which will provide more revenue for the Treasury, he would welcome more wholeheartedly the excellent amendment moved by my hon. Friend the Member for Basingstoke (Mr. Mitchell).
The remarks of my hon. Friend the Member for Croydon, South (Mr. Clark) were of particular interest. I greatly hope that the Chief Secretary will have another look at the grossly unfair treatment accorded to trustee savings banks in this country. Had he been pleased to concede the same rate to them as to building societies the cost would have been £750,000 a year, which is not particularly great. I understand that I do not have to bypass the point I have made, but it should be a passing reference—

Mr. Deputy Speaker (Mr. George Thomas): I suggest that it has now passed.

Mr. Finsberg: I had assumed that.
We are doing the right thing in trying to stress once again to right hon. and hon. Gentlemen on the Treasury Bench that they must look at this matter in a much more flexible manner. It is difficult to know what goes on behind the exterior of the Chief Secretary. He nods most sagely and wisely and is of most pleasant appearance, but he must inwardly hate the briefs he has to put over. The greatest pleasure to back benchers yesterday was in watching the faces of the officials as their advice was rejected over and over again by the House. They will have to get used to that happening on many more occasions, and I believe that this will be one of those occasions.
The proposal to dilute the savage attack which would otherwise be made on small businesses by the Government's

proposals on corporation tax ought to be supported. I do not mind which of the two amendments is accepted. The Chief Secretary is looking so benign that he may be about to tell us that he will accept one of them. It is difficult to tell, but we live in hope.
The Chief Secretary will be doing a great service to the small businesses and, strangely enough, although he does not appreciate it, he might begin to claw back some of the electoral advantage which was thrown away by his party yesterday if only he would see that the small businesses provide secure employment in conditions that are usually of the best. I appeal to him to take a more constructive approach to these amendments.

Sir Harmar Nicholls: I do not think it is irrelevant to remind the House that the Prime Minister boasted, when he formed his Government, that he had put people of experience on the Treasury Bench. He said that they had had experience in the previous Labour administration. I hope, in view of that experience, that they will carry on with the old conventions. While the Under-Secretary of State for Industry who is responsible for small businesses is with us now, his absence during the whole of the debate yesterday and most of today's debate is to be deplored.
I remember the time when the Department would not allow a junior Minister to remain in the Department when something was being discussed in the House which was likely to impinge upon his responsibilities. Perhaps the Department has gone soft, too. I hope that that old convention, which I believe is a sound one, will be upheld and that Ministers will come here so that they may know at first hand what is going on.
The hon. Member for Cornwall, North (Mr. Pardoe) had me worried. He has been so sound on this subject until now. While he did not make a contribution yesterday he was listening intently and when it came to the vote he showed that he had been listening to some good purpose. What we are seeking to do today is not separate from the decision made yesterday. It is an obvious follow on. What we did yesterday was to include more people in the bracket by raising the figures. What we are trying to do now is to face up to the problems


of those in the small bracket who were affected before yesterday's amendments were made. They are a real problem. Just because we included more people who are likely to benefit it does not mean that we have removed the problems of those in that bracket.
I do not like talking in theoretical terms. Most of my experience on these matters is practical. I want to pass on a situation which typifies these problems. I know of a man who had a main concern with 25 subsidiaries. At the end of the year, after having tried to run all these things—developing a heart condition in the process—he decided that what he had to pay by way of tax left him in such a position that the net returns were intolerable.
He divested himself of 24 of the subsidiaries and left himself with one main branch. He got rid of his responsibilities. He took away all the advantages of employment which he was creating through the bigger organisation. He found that when he had taken account of the taxation position he was as well off with the one branch as when he had had the larger business.
It is a sad thing when we remove encouragement and incentive for people to expand and develop. It is bad for the consumer and it is bad for the efficiency of industry. The Chief Secretary is aware from his professional experience of the fact that the margin of incentive left to the small business man just does not justify the risks, the worry and the trouble he has to take to keep going.
It is because we would like to give that extra bit of encouragement that we have introduced this amendment. I recognise the strength of the argument in favour of leaving the rate at 40 per cent. However I believe that the demands being made are such that we have to give positive encouragement.
My hon. Friend the Member for Gloucestershire, South (Mr. Cope) suggested that the cost of the amendment would be about £35 million. I saw that the Chief Secretary nodded at that. I have not come to that figure and I would be interested to hear the official figures. Perhaps I can tell the Chief Secretary how I arrive at my figures, because if I am wrong I want to be told why. The amendments carried yesterday cost £15

million. The figure of £15 million has to be taken from £35 million, which would bring us down to £20 million. I believe that the Government would be left with £20 million, which we suggest would be based upon a 2½ per cent. excess which he expects to get as a result of this Bill. I think he will find that if he takes that figure and if he bases it on the present 40 per cent., the actual cost of what we are asking him to do would be £9 million to £10 million, or less. That brings it into the range of possibilities.
It would be consistent with the decision taken by the House yesterday. The hon. Gentleman ought not to disregard what Parliament seems to want. The vote yesterday, with a 25 majority, showed that Parliament, with all its objectivity and impartiality, wanted this. This was not a Conservative Opposition pushing a doctrinaire point of view. It is true that it is part of the Conservative platform. We believe that the small business man must be maintained for the good of the nation. However, we had the support of the Liberal Party and the various offshoots of the nationalist parties who certainly cannot be adjudged members of the Tory Party.
This was an objective and impartial decision, and since that indication has been given, the hon. Gentleman would be following parliamentary democracy by listening with even more sympathy to us today. It is also consistent with the claims and the boasts which the Treasury Bench has made. My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) was right to underline the point of interest which took the argument outside the narrow realms of the effect upon the individual small business.
What the Government are claiming is that they have helped the consuming public by giving food subsidies to hold down prices. The only effect of increasing this tax by 2½ per cent. would be to put up the prices of these goods to some extent. For the Government to boast on the one hand that they are trying to keep prices stable by giving subsidies and then to push through increased taxes which would have exactly the opposite effect is a complete contradiction which I do not believe the hon. Gentleman as an accountant, an actuary, would like to have upon his conscience or upon his record.


[Interruption.] He may have to go back to his private office after next October. The chances are that he will.
He must return with a reputation unsullied by the sort of contradictions coming forward now. The small businesses have established their claim. Parliament showed yesterday that it accepted that claim. A reduction of 1 per cent. in this rate is the sort of contribution that would help these businesses, the nation, and, I think, the hon. Gentleman.

5.30 p.m.

Mr. Nicholas Ridley: I was interested in the point made by my hon. Friend the Member for Peterborough (Sir Harmar Nicholls). The same point was made by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), namely that a rise in corporation tax was likely to result in a rise in the prices of products made by any given company. I do not believe that to be so, but there is a large area of doubt about it. The effect of the rise in corporation tax will be to take away more of the profits. Prices will not rise, because they are controlled by market forces, and there are few areas where prices can be forced up against the market. If my hon. Friends are right, a rise in corporation tax is a rise in prices which is a reduction of the amount of money in the hands of the public. It must be that an increase in corporation tax will take money out of circulation. That will mean a reduction in the money supply. Therefore, the amendment is inflationary and not deflationary and it would contribute towards the mini-Budget if we were to pass it.
I did not intervene yesterday but I watched the Opposition's mini-Budget unfolding. I loyally supported my right hon. and hon. Friends in the Lobby. I wondered today, I having spent a few hundred million pounds yesterday—

Mr. David Howell: Did you?

Mr. Ridley: We did. Today I heard the Minister of Agriculture, Fisheries and Food spend another £3 million.

Mr. Howell: I think that my hon. Friend has said that a few hundred million pounds were spent yesterday. I hope that he is not swallowing some of

the wildly inflated figures which were handed out from the Dispatch Box at a rather late hour last night. I hope that he will study the figures which were discussed yesterday which according to my calculations amount to about £54 million.

Mr. Ridley: As my hon. Friend rightly says, £54 million. In addition there will be the impact of a far greater sum relating to rentals and VAT.
It worries me that we should now be spending all this extra money. I wonder what the Chancellor will have to do in his mini-Budget on Tuesday. Is it proposed that he should increase taxes so as to take away the extra money which we are spending?

Mr. David Mitchell: When my hon. Friend refers to the extra money that we are spending, does he ally that with certain monies remaining in the hands of the business community to fructify and to be invested in plant and equipment and with the profits which it has generated?

Mr. Ridley: There is no doubt that it is expenditure. We are talking about the revenues of the Exchequer. If we pass this amendment and similar amendments we shall reduce those revenues and, therefore, contribute towards an increase in the rate of inflation at some further stage. The excessive expenditure of the Government is already causing our inflation rate to become intolerable. The very problems which have been mentioned as being at the base of the problems facing small businesses—for example, accelerating inflation and liquidity difficulties—will under these conditions be exacerbated if we contribute to increasing the rate of inflation.

Sir Harmar Nicholls: I have a lot of sympathy with the general view that I know my hon. Friend is trying to put forward. We are in an inflationary situation which could bring the country to disaster. It could do so very soon. I do not believe that any mini-Budget or anything that aggravates that situation to any great extent would be acceptable to the House or the country. I hope that my hon. Friend is not arguing that the situation is perfect and that there are no narrow areas in which relief would have the opposite effect to the general argument that he is putting forward. I tried to


give a practical example to the House. I referred to a man who ran a company with 25 branches and who, because of excessive taxation, cut down his branches. He would be replaced by 24 new organisations which would not be run as efficiently or cheaply and which would add to the inflationary position much more than if the man to whom I referred were encouraged to carry on from his one central organisation. Many of my hon. Friends agree with the general argument that my hon. Friend is putting forward, but he must not suggest that everything is perfect. There are certain areas of the business community which could be helped constructively by the proposals that we are putting forward.

Mr. Ridley: I intend to support my right hon. and hon. Friends in the Lobby. I do not wish to cause them any apprehension. I am merely asking the Chief Secretary a question. I am asking him how he will raise revenue to cover the concessions which we are asking of him. I am asking him what his right hon. Friend will do next Tuesday in that regard. It is clearly right that these amendments should be made with the will of the House, but we must have regard to the overall balance of the Chancellor's Budget. It is incumbent upon those of us who put forward areas for relief to indicate where they would like to see increases made to match the reductions which they are proposing.
I come to the merits of this particular relief. I think that we must justify the figure of three-quarters which appears in Amendment No. 101. In a way, that is made easier for me by the action of the House last night in extending the limit from £15,000 to £25,000 for qualifying companies. Within the bracket of £15,000 to £25,000 there will be some companies in desperate need of investment funds for growth. Within the original bracket from £0 to £15,000 there will be fewer companies in that position because so many of them are shops and small businesses which are not contemplating expansion and for which capital is not necessarily the main problem. That seems to be the justification for having a lower rate for small businesses. As they do not have access to the market it must be that they can invest in the future only out of retained profits. If that is so, we should

be directing ourselves to companies which do not have access to the market.
Is it not rather rough justice to take a figure out of the air, such as three-quarters or 40 per cent. as against 52 per cent., and to say that that figure applied to a range of companies which make profits of less than £25,000 will be the rate of corporation tax? That seems to be an arbitrary decision, supporter as I am, and as I think every hon. Member knows, of small businesses and of giving such businesses special help.
I put my second question to the Chief Secretary. When the Treasury prepares its suggestions for next year's Budget—I do not now refer to the mini-Budget—will regard be had to the tax relief which is to be made available to increase the funds available from investment for those companies which cannot easily or properly obtain funds from the public or from other sources? It seems that we should think much more in terms of going up to the size of a company which might be able to go public and of gearing relief to a greater degree to the amount of investment that is made. The justification for two static companies, one inside the bracket and one outside, one of which will pay only three-quarters of the tax that the other will pay, will be hard to sustain. On the other hand, I am sure that it is right that we should take special measures for this part of the corporate sector.
What increases in taxation will the Chancellor propose next Tuesday to cover the worthwhile amendments which my hon. Friends have been making? Secondly, will the Treasury do some deep thinking for next year's Budget about what should be the proper form of assistance to small companies through the taxation system, bearing in mind the need to increase their resources available for investment?

Sir Raymond Gower: I think that my hon. Friend the Member for Basingstoke (Mr. Mitchell) and my hon. Friend the Member for Croydon, South (Mr. Clark) presented their appeal to the Government in moderate and fair terms. I believe that they did so most impressively.

Mr. David Mitchell: Hear, hear.

Mr. Clark: Hear, hear.

Sir Raymond Gower: I am glad to hear my hon. Friends agree with me. I think that the hon. Member for Cornwall, North (Mr. Pardoe), who has now returned to the Chamber, was perhaps unwittingly making a slight error when he suggested that the concession which was obtained yesterday in some way made it unnecessary to have this concession today.
The concession which was made yesterday benefits some companies which were formerly in another band, but it does not benefit the large number of small businesses which are already classified as such. For them this concession is needed.

Mr. Pardoe: I ask the hon. Gentleman to withdraw his remark that I had just returned to the Chamber. During the whole course of the debate I have not been absent from it.

Sir R. Gower: I am sorry. The hon. Gentleman must have left his seat for a moment.
My hon. Friends have not over-stated the case for the amendment. They may perhaps have under-stated it. For many small companies it is not a question of lack of confidence in the future but of profound anxiety about the future. My anxiety arises from the fact that all Governments and too many financial commentators tend to judge our economy by the results which the big companies—the standard bearers—achieve. If the results of ICI and other large companies are good, everyone seems to think that the country is doing well. All Governments and far too many commentators in the journals and the Press are guilty of this practice.
In Napoleonic times we were characterised as a nation of small shopkeepers. Perhaps today we should be characterised as a nation of small manufacturers. It is not so much the well-established small company that is at risk but the small company that has just commenced business and is making its first halting attempt to establish itself. How baffling must be the prospect for a small company which seeks to establish itself today. Practically all overheads have increased in cost astronomically—rentals, industrial rates, lighting, heating, postal charges, telephone charges. The financing of running

costs, purchases, stocks and work in progress is enormously expensive for a small company. If a small firm which is just starting borrows money from a banker or from any other source the interest rate is prohibitive.
In addition, the Government are proposing a sledgehammer blow of a substantial increase in tax. There is a tendency to underestimate the profound anxiety felt in the board rooms of small companies, in small family firms and in firms which are run by individuals. Against that background I appeal to the Government through the Chief Secretary not to regard the amendment as a concession which might be made next year rather than this year. It is a concession which must be made now. What are at risk are not the great standard bearers but the small companies from which some day we hope the future standard bearers will emerge. The prospect of the ICIs of tomorrow ever emerging from the small companies of today seems to be remote.
The country faces new and difficult economic problems of a kind which our fathers and forefathers did not have to contemplate. I admit that all Governments, as well as international circumstances, have contributed to those difficulties. By making the concession the Government will show that they are not judging the health of our economy purely from the results achieved by large organisations but that they are sensitive to the small companies which in the long term will perhaps contribute more to our economy than will the larger companies which receive so much attention.

5.45 p.m.

Mr. Joel Barnett: This is the fourth debate we have had on the important subject of small companies. I note with interest that the Conservative Party believes in small companies and I am pleased to hear that. I am surprised, if the Conservatives are so interested in small companies, that they should have introduced the corporation tax system which did small companies so much harm.

Sir Harmar Nicholls: They made a mistake.

Mr. Barnett: I am delighted to hear the hon. Gentleman admit the mistake.


We have had no such admission from the Opposition Front Bench.
The concession which was made yesterday to extend the relief not to small companies but to companies with small profits will cost £15 million. That concession means that the cost of accepting this amendment is considerably more. I hesitate to argue about the arithmetic of the hon. Member for Peterborough (Sir H. Nicholls), who has great knowledge of this subject, but I am advised that, because of the extension of the relief to more companies, the cost of Amendment No. 101 is £20 million. The cost of the typically modest Amendment No. 103 laid by the hon. Member for Croydon, South (Mr. Clark) is slightly less at £15 million.

Sir Harmar Nicholls: If the cost of Amendment No. 103 were calculated on the present rate of 40 per cent., it would cost nothing. If it were calculated on the rate I ask for, according to the figures which the hon. Gentleman has given it would cost £5 million.

Mr. Barnett: The hon. Gentleman must be aware that the amendment is to this year's Finance Bill and not to last year's. This year's Finance Bill has in it a rate of 42 per cent. I hope that the hon. Gentleman will accept my figures.
It is unnecessary for me to go over again the arguments for helping small companies wherever we can. I noted the remarks of several hon. Members, particularly the hon. Member for Basingstoke (Mr. Mitchell). The Opposition apparently have a great desire for maximum intervention in the affairs of small companies. They wanted my hon. Friend the Under-Secretary of State for Industry who is responsible for small businesses to be here, presumably because they want him to be active in intervention. He was not here this afternoon because he was at a conference with Mr. de Laszlo at the offices of the Small Businesses Association. I am sure the hon. Gentleman will understand that one reason for discussing these matters is to get the maximum intervention by Government, which I am happy to see Conservative Members are keen to have. My hon. Friend came here immediately after having those discussions with the Small Businesses Association. I shall be happy to

give way to allow the hon. Member for Basingstoke (Mr. Mitchell) to apologise.

Mr. David Mitchell: I am glad to know that that was the reason the Minister was not in the Chamber at the time, and perhaps he was similarly occupied last night. Perhaps the hon. Gentleman could say that he was able to satisfy the Small Businesses Association, because the Chief Secretary does not appear to be doing so.

Mr. Barnett: I have been so busy in the last one-and-a-half hours listening to the debate and to every word uttered that I have not had time to consult with my hon. Friend. I am sure if I had attempted to do so it would have been taken amiss. It would have been thought that I had stopped listening to the fascinating speeches we have heard in this debate.
Let us get clear at the outset that we are not talking about small businesses, but about companies with small profits. The hon. Member for Cirencester and Tewkesbury (Mr. Ridley), in his typically fair way, pointed out that we should direct our attention to those small companies which cannot go to the market. He was referring to the close company, as it was called under the former system of corporation tax—a system which the Conservatives voted out. That was the type of company which would have benefited.
I was asked by the hon. Member for Gloucestershire, South (Mr. Cope) whether I would rather help small companies with large profits. The answer is, yes, I would. However, these amendments would help companies right across the board—not only small companies, but large companies, quoted companies—and often very inefficient companies. This is the wrong way to go about helping small companies, if that is what the hon. Gentleman had in mind.

Mr. Cope: Is not this an argument against the system covered by these provisions? In other words, it is not an argument against the amendment, but against the system.

Mr. Barnett: It is the system which makes it impossible to direct attention to the type of company which the hon. Member for Cirencester and Tewkesbury had in mind.

Mr. Ian Lloyd: Would the Chief Secretary assist by defining what he means by "small"? Does he mean small in terms of numbers employed, or capitalisation, or what? Surely he admits that there is a considerable correlation between profits and capitalisation and profit and other factors. Although the hon. Gentleman described as an exception the fact that the large company may make small profits, the statistical distribution across the 800,000 or so companies shows that that is not the case.

Mr. Barnett: Following the provision carried by the hon. Gentleman and his colleagues, small companies are defined as companies with profits of less than £25,000 with the reliefs tapering off on profits of up to £40,000. We are now talking about giving further relief to that type of company. If the amendments are carried, we should be directing attention not only to the excellent type of small close company, which is very important as a trading company, but to the inefficient quoted companies, property companies, investment companies, and so on. I do not think that is what Conservative Members have in mind. Therefore, these amendments do not achieve their objective.
My experience is that it is not the level of taxation that stops the small company being efficient. There are many other reasons, but it is certainly not that factor. I do not want to widen the subject to the question whether an increase in taxation means an increase in prices. The hon. Member for Cirencester and Tewkesbury had a fascinating argument with his hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop). I think that the matter can also be argued the other way. The real question should be directed to the Opposition Front Bench since we understand that they are deciding how much reflation there should be in the economy.
The hon. Member for Cornwall, North (Mr. Pardoe) appeared to argue that we had done enough for now for the new type of company. One Conservative contributor to the debate thought the hon. Member for Cornwall, North was in error. Perhaps the hon. Member for Cornwall, North was keeping his votes in balance. He voted yesterday with the

Opposition and now feels that he has to balance it a little the other way. He may be in danger of looking too much like his coalition partners, and that is the reason for his present stance.

Mr. Pardoe: The Chief Secretary is not conducting the debate at a worthy level. There is no question of trying to balance the votes at all. Out of the £30 million for which the amendments are asking, £15 million has already been given to small companies. The Chief Secretary by indulging in fatuous remarks will not lure me into the Opposition Lobby.

Mr. Barnett: I am not trying to lure the hon. Gentleman anywhere. I was trying to help the House to understand the hon. Gentleman's motives.
The hon. Member for Cirencester and Tewkesbury began by arguing that the effect of the amendments was bad because it expanded the money supply. He was a little upset at what his Conservative colleagues did yesterday. He even managed to upset his hon. Friend the Member for Guildford (Mr. Howell). He apparently thought that they made a mess of things yesterday by increasing the money supply too greatly. Then, to our astonishment, he decided that he could still vote for the amendment. I cannot understand why he should wish to do so.

6.0 p.m.

Mr. Ridley: Will the hon. Gentleman answer my question? Will he propose increased taxation next week such as I believe to be necessary not only to deal with the excessive money supply which already exists but to deal also with the increase which will result from our work yesterday and today?

Mr. Barnett: I noted the hon. Gentleman's question, but I am not ready to open my next Budget yet.
The real argument, as I have said in each of these four debates, is first that a proposal of this kind does not help small companies alone. It helps many others. What is more, this House has decided already to help this type of company to the extent of £15 million as a result of its decision yesterday. It has extended the relief for the lower rate of tax to a number of other companies, and 1 do not think that it would be right


now to reduce their tax further. The Opposition should think carefully before deciding to put another £20 million into the money supply by supporting Amendment No. 101.

Mr. J. Bruce-Gardyne: The hon. Gentleman knows that this is a spurious argument. Under the rules of order. it is not open to the Opposition to suggest points at which the Government could increase their revenues. That is for the Government to do. If Parliament in its wisdom decides to diminish the Government's revenues, it is entirely open to the Government to counterbalance that by reductions in public expenditure or by increases in user charges, which only the Government can propose.

Mr. Barnett: It would have been a little more honest of the Opposition, when they are increasing the money supply and reducing taxation in the way that they are, to have made a passing reference to what they would suggest should be done to compensate for it. We have not heard a word about that from the Opposition. This is a very important point, and I am fascinated to know whether the hon. Member for Guildford (Mr. Howell) will now tell us how he would suggest—

Hon. Members: That is for the Government to do.

Mr. Barnett: The increase in the money supply is the responsibility of the Opposition. I am sorry that they are so sensitive about this. Government supporters did not vote for the amendments yesterday. The Opposition did, and they must suffer the consequences of their actions.
If the hon. Member for Guildford tells us precisely what he would do to balance the evil to the economy, which he and his right hon. and hon. Friends did yesterday, we shall listen most carefully. If he tells us, I am sure that my right hon. and hon. Friends will be delighted. It will help us to add to our manifesto. So far, we have not had that. All that we have had so far is dishonest votes to reduce taxation.

Mr. Rost: Does not the hon. Gentleman accept that what Parliament has done by its votes yesterday and what it proposed in this amendment will result in

a reduction in the money supply? By depriving the Executive of additional revenue, we have forced a discipline upon the Government to reduce their expenditure.

Mr. Barnett: If the hon. Gentleman believes that, he will believe anything. That is the most disingenuous argument that I have ever heard.
I have made it clear already that what the Opposition are proposing in these two amendments, first, will not help close companies in the way that they intend and, second, is a wholly false way to spend more money. The hon. Member for Cornwall, North talked about priorities. If the Opposition had £20 million of tax relief to give, would they give it in this way? That is the question that this House has to decide. The Government could find many ways in which we might want to spend £20 million. But in this Finance Bill, this is not the way. I ask my right hon. and hon. Friends to resist the amendments.

Mr. David Howell: It will have come as no surprise to the House once again that we have received a quite hopeless reply from the Chief Secretary. We had a feeble and light-weight reply yesterday, and we have had the same today.
We are dealing here with a very large number of companies. We are dealing not only with close companies, of which the hon. Gentleman said there were 350,000, but with other companies as well which may come within the profit margins with which we are concerned.
I think that the hon. Member for Cornwall, North (Mr. Pardoe) is a little confused about what happened yesterday. By raising the limits to £25,000 graded to £40,000, we benefited those companies earning above £15,000 of profit. We brought them into a situation where they got a benefit. Yesterday, we were not touching the 180,000 to 200,000 companies with profits below £15,000. The amendment today is concerned with that vast number of companies which were not benefited in yesterday's amendments. I do not know whether the hon. Member for Cornwall, North is happy about that, but it is clear that the Chief Secretary has got into a muddle about it.
At one point, the Chief Secretary said that we did not want to give further relief to these companies. But yesterday we did not give relief to companies earning below £15,000. At another point, the hon. Gentleman said that we had given enough help to companies of this type. He ignores the 180,000 to 200,000 with profits below £15,000 which were not touched by yesterday's amendment.

Mr. Joel Barnett: Is the hon. Gentleman suggesting that these amendments would give no relief to those companies assisted yesterday by new Clause 14?

Mr. Howell: Of course not, but there is a vast category of quoted companies—on the Chief Secretary's own admission, 180,000 to 200,000 of them—which were not helped yesterday because their profits are below £15,000 and which would be helped by today's amendment.
It is quite incorrect to suggest that there is a matter of further relief to those companies. They were given no relief yesterday. It is also incorrect to suggest that more help is to be given to companies of this type. They were not helped yesterday.

Mr. Pardoe: The hon. Member for Guildford (Mr. Howell) has put the record straight. None of us is in any doubt now. If he had to choose between yesterday's amendment and today's, for which one would he go?

Mr. Howell: I am about to answer that question, though I shall not answer it directly. I shall say how we approach this matter.
I have said enough already to indicate that I see these amendments not as a matter of choice but as complementary, because today's amendment is helping the 180,000 to 200,000 companies with profits below £15,000 which were not helped by yesterday's amendment.
Whether we talk about Amendment No. 103 or Amendment No. 101, the figures are modest. There are other ways of helping the collapse in confidence and the desperate cash and liquidity situation of small companies. We discussed this yesterday. One way would involve the Chief Secretary keeping his colleagues in the Department of Trade quiet. That would be a cheaper way. If that is not possible,

we must look for ways in which we can in some degree benefit those tens of thousands of companies which are not affected by yesterday's amendment. This amendment does that.
My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) referred to the effect on the money supply. Others of my hon. Friends made the fair point that if expenditure is increased or the revenue is reduced it is up to the Government to find other ways of making it up. The Chief Secretary challenged that point. That argument could go on ad infinitum.
We have proposed a number of modest amendments which have been accepted. The total expenditure involved is well within the responsible levels which any Opposition ought to be entitled to put forward, is well within the tolerances of any Budget judgment, and is far away from the wild figures about which the Chancellor was trumpeting when he came to the House last night and spoke at the Dispatch Box.
We make no apology for putting forward sensible and constructive amendments. The Chief Secretary ought to apologise, if apologies are to be made, for giving a misleading answer by indicating that companies earning below £15,000 profit were helped yesterday. They were not. They will be helped today by this additional complementary amendment.
I advise my right hon. and hon. Friends to pursue Amendment No. 103 which, according to the Chief Secretary, will cost a further £15 million. That would be the sensible way to carry forward a sensible policy at this time.
Yet again the Chief Secretary and his right hon. and hon. Friends seem to be completely out of touch with the mood of growing concern and crisis in the boardrooms of small and not-so-small companies throughout the land. They seem to be out of touch with all the difficulties and the growing sense of crisis within these companies of trying to find cash and liquidity for future investments. The hon. Gentleman is unaware of the situation. We are not. I strongly advise my right hon. and hon. Friends to press Amendment No. 103. I believe that present circumstances make it right that we should do so.

Mr. John Loveridge: I am sorry in some ways to join the debate at a rather awkward moment, but the Chief Secretary said that it was not the levels of taxation that stopped small companies being efficient. I am not so sure. If the Government keep stepping up taxation, they can step it up to such a degree that they can close every business in the land. There must be some point at which businesses are taxed out of existence.
No one has claimed what the Chief Secretary denied. It is not efficiency that is at stake but the capacity of these businesses to expand for the good of the national economy.
It is a great pleasure for me to support my hon. Friend the Member for Basingstoke (Mr. Mitchell) who so ably set out why the amendment should commend itself to the House. It is sad to feel that back benchers on the Government side have not had enough interest to join in the debate, although a large proportion of workers are employed in small businesses.

Mr. David Weitzman: We on the back benches are no partners to the Opposition's irresponsibility.

Mr. Loveridge: The first intervention from a Government back bencher speaks only of irresponsibility. There is no word of argument within it. It means nothing. [Interruption.] I ask hon. Gentlemen to make their judgment at the end when they have heard what I have to say.

Mr. John Tomlinson: Get back to your painting.

Mr. Loveridge: I am glad that someone likes my paintings. I thank the hon. Gentleman for that compliment.
There are three good reasons for supporting the amendment. The first is that it would add to the simplicity of taxation, to the certainty of it for the future and to the understanding of those who are taxed. The second is the unfairness of the Chancellor's proposals which are discriminatory against the smaller firms. The third reason is the importance of retained earnings to the smaller business, especially to the business that needs liquidity for expansion.
I should declare an interest. I am the head of a small or medium-sized business. It is, however, run as a partnership and, therefore, there is no direct effect on me from the amendment.
6.15 p.m.
On the first aspect of simplicity and clarity, the amendment calls for a fixed rate of three-quarters of the full rate in future. Oh, how we long for some certainty—[Interruption.] Hon. Gentlemen may laugh, but many people weep. We long for some certainty from this Government over matters of taxation. We are tired of being told what is to come in a future Budget which will be antedated to a past Budget. No wonder accountants and solicitors feel unable adequately to advise clients who are faced with threats of being squeezed until the pips squeak. What kind of Government works by threat?
A letter that I received recently from the head of a large business contained these words:
I and several other members of the senior management of the company spend more than a third of our time in meeting the demands of unnecessary Government interference.
Small companies do not have so many senior managers to spare. Often more than one-third of the time of those who run small businesses may be taken in trying to meet the effects of unnecessary Government interference! For that reason, the simpler, clear, definitive rate of three-quarters for the future would be better.
Secondly, I spoke of unfairness. Last year the ratio of the burden on the smaller company compared to the larger was 40 per cent. to 50 per cent. This year it is 42 per cent. compared to 52 per cent. Therefore, the increases in corporation tax affect the larger company by 4 per cent. and the smaller company by 5 per cent. extra. Why bash the small firm more than the large firm?
The third aspect is perhaps the most important—namely, the financial effect of the amendment which would reduce the present tax by 1 per cent., or 3 per cent. below what is proposed by the Government.
Firms need liquidity increases to expand and to invest. They are already hit in their cash flows, because they have to renew their stocks at higher prices than they paid for their stocks last year. They


have to meet the burden of exceptionally high interest rates on borrowed money. They have tight lines of credit from larger companies, themselves pressed for cash due to the impact of threshold agreements. They also have to meet advance payments of taxation, on a substantial scale in many cases.
Expanding businesses, which get paid for their goods after the delivery of those goods, or by progress payments after work done, need growing capital funds if they are not to be at risk of over-trading, and thus a threat to those with whom they do business.
Bank loans are nominally repayable on demand, even though they may be extended. Long-term money is not usually available on reasonable terms to the smaller or medium-sized businesses. They cannot go to the stock market because they are too small. Therefore, as soon as these smaller firms start to expand, they run into liquidity problems. It is an inevitable pattern. The amendment would play a small but significant part in helping them to meet these cash flow problems.
I hope the Government will be able to meet at least part of what has been proposed by my hon. Friend. They can accept the second amendment. That would show a gesture of good will.

The smaller firms have friendly relations and amicable co-operation with their workforces. They are recognised worldwide for their innovations. They represent the hope for the future, the "seed corn" as they have been described. That is indeed a good and true phrase, however much those on the Opposition benches may laugh at it. For all these reasons, I ask the Government to accept the amendment.

Mr. David Mitchell: On a point of order, Mr. Speaker. With Amendment No. 101 we have been discussing Amendment No. 103. If I withdraw Amendment No. 101, would it meet your approval for a vote to be taken on Amendment No. 103?

Mr. Speaker: I would allow Amendment No. 103 to be moved formally and then voted on.

Mr. David Mitchell: On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: No. 103, in page 6, line 29, leave out '42' and insert '40'.—[Mr. William Clark.]

Question put, That the Amendment be made:—

The House divided: Ayes 283, Noes 292.

Division No. 87.]
AYES
[6.22 p.m.


Adley, Robert
Burden, F. A.
Dunlop, John


Aitken, Jonathan
Carlisle, Mark
Durant, Tony


Alison, Michael (Barkston Ash)
Carr, Rt. Hn. Robert
Dykes, Hugh


Allason, James (Hemel Hempstead)
Carson, John
Eden, Rt. Hn. Sir John


Amery, Rt. Hn. Julian
Chalker, Mrs. Lynda
Edwards, Nicholas (Pembroke)


Ancram, M.
Channon, Paul
Elliott, Sir William


Archer, Jeffrey
Chataway, Rt. Hn. Christopher
Emery, Peter


Atkins, Rt. Hn. Humphrey (Spelthorne)
Churchill, W. S.
Ewing, Mrs. Winifred (Moray &amp; Nairn)


Awdry, Daniel
Clark, A. K. M. (Plymouth, Sutton)
Eyre, Reginald


Baker, Kenneth
Clark, William (Croydon, S.)
Fairgrieve, Russell


Balniel, Rt. Hn. Lord
Clarke, Kenneth (Rushcliffe)
Farr, John


Banks, Robert
Clegg, Walter
Fell, Anthony


Bell, Ronald
Cockcroft, John
Fenner, Mrs. Peggy


Bennett, Sir Frederic (Torbay)
Cooke, Robert (Bristol, W.)
Fidler, Michael


Bennett, Dr. Reginald (Fareham)
Cope, John
Finsberg, Geoffrey


Biggs-Davison, John
Cordle, John
Fisher, Sir Nigel


Blaker, Peter
Cormack, Patrick
Fletcher, Alexander (Edinburgh, N.)


Body, Richard
Corrie, John
Fletcher-Cooke, Charles


Boscawen, Hon. Robert
Costain, A. P.
Fookes, Miss Janet


Bowden, Andrew (Brighton, Kemptown)
Craig, Rt Hon W. (Belfast E)
Fowler, Norman (Sutton C'field)


Boyson, Dr. Rhodes (Brent, N.)
Critchley, Julian
Fox, Marcus


Braine, Sir Bernard
Crouch, David
Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)


Bray, Ronald
Davies, Rt. John (Knutsford)
Fry, Peter


Brittan, Leon
d'Avigdor-Goldsmid, Maj.-Gen.James
Galbraith, Hn. T. G. D.


Brocklebank-Fowler, Christopher
Dean, Paul (Somerset, N.)
Gardiner, George (Reigate &amp; Banstead)


Brown, Sir Edward (Bath)
Deedes, Rt. Hn. W. F.
Gardner, Edward (S. Fylde)


Bruce-Gardyne, J.
Dixon, Piers
Gibson-Watt, Rt. Hn. David


Bryan, Sir Paul
Dodds-Parker, Sir Douglas
Gilmour, Rt. Hn. Ian(Ch'sh' &amp; Amsh'm)


Buchanan-Smith, Alick
Dodsworth, Geoffrey
Gilmour, Sir John (Fife, E.)


Buck, Antony
Douglas-Home, Rt. Hn. Sir Alec
Glyn, Dr. Alan


Budgen, Nick
Drayson, Burnaby
Goodhart, Philip


Bulmer, Esmond
du Cann, Rt. Hn. Edward
Goodhew, Victor




Goodlad, A.
McAdden, Sir Stephen
Roberts, Michael (Cardiff, N.-W.)


Gorst, John
MacArthur, Ian
Roberts, Wyn (Conway)


Gow, Ian (Eastbourne)
MacCormack, Iain
Rodgers, Sir John (Sevenoaks)


Gower, Sir Raymond (Barry)
McCrindle, R. A.
Rossi, Hugh (Hornsey)


Gray, Hamish
McCusker, H.
Rost, Peter (Derbyshire, S.-E.)


Grieve, Percy
Macfarlane, Neil
Royle, Sir Anthony


Griffiths, Eldon (Bury St. Edmunds)
MacGregor, John
Sainsbury, Timothy


Grist, Ian
McLaren, Martin
Scott-Hopkins, James


Grylls, Michael
Macmillan, Rt. Hn. M. (Farnham)
Shaw, Giles (Pudsey)


Gurden, Harold
McNair-Wilson, Michael (Newbury)
Shaw, Michael (Scarborough)


Hall, Sir John
McNair-Wilson, Patrick (New Forest)
Shelton, Willam (L'mb'th, Streath'm)


Hall-Davies, A. G. F.
Madel, David
Shersby, Michael


Hamilton, Michael (Salisbury)
Marshall, Michael (Arundel)
Silvester, Fred


Hampson, Dr. Keith
Marten, Neil
Sims, Roger


Harrison, Col. Sir Harwood (Eye)
Mather, Carol
Sinclair, Sir George


Harvie Anderson, Rt. Hn. Miss
Maude, Angus
Skeet, T. H. H.


Hastings, Stephen
Maudling, Rt. Hn. Reginald
Smith, Dudley (W'wick &amp; L'm'ngton)


Havers, Sir Michael
Mawby, Ray
Spence, John


Hawkins, Paul
Maxwell-Hyslop, R. J.
Spicer, Michael (Worcestershire, S.)


Hayhoe, Barney
Mayhew, Patrick(Royal T'bridge Wells)
Sproat, Iain


Heath, Rt. Hn. Edward
Meyer, Sir Anthony
Stainton, Keith


Henderson, Douglas (Ab'rd'nsh're, E)
Miller, Hal (B'grove &amp; R'ditch)
Stanbrook, Ivor


Henderson, J.S.B. (Dunbartonshire, E.)
Mills, Peter
Stanley, John


Heseltine, Michael
Miscampbell, Norman
Steen, Anthony (L'pool, Wavertree)


Higgins, Terence
Mitchell, David (Basingstoke)
Stewart, Donald (Western Isles)


Hill, James A.
Moate, Roger
Stewart, Ian (Hitchin)


Holland, Philip
Molyneaux, James
Stodart, Rt. Hn. A. (Edinburgh, W.)


Hordern, Peter
Money, Ernie
Stokes, John


Howe, Rt. Hn. Sir Geoffrey (Surry, E.)
Monro, Hector
Stradling Thomas, John


Howell, David (Guildford)
Moore, J. E. M. (Croydon, C.)
Tapsell, Peter


Howell, Ralph (Norfolk, North)
Morgan-Giles, Rear-Adm.
Taylor, Edward M. (Glgow, C'cart)


Hunt, John
Morris, Michael (Northampton, S.)
Taylor, Robert (Croydon, N.W.)


Hurd, Douglas
Morrison, Charles (Devizes)
Tebbit, Norman


Hutchison, Michael Clark
Morrison, Peter (City of Chester)
Temple-Morris, Peter


Iremonger, T. L.
Mudd, David
Thatcher, Rt. Hn. Margaret


Irvine, Bryant Godman (Rye)
Neave, Airey
Thomas, Rt. Hn. P. (B'net, H'dn S.)


James, David
Neubert, Michael
Townsend, C. D.


Jenkin, Rt. Hn. P. (R'dge W'std &amp; W'fd)
Newton, Tony (Braintree)
Trotter, Neville


Jessel, Toby
Nicholls, Sir Harmar
Tugendhat, Christopher


Johnson Smith, G. (E. Grinstead)
Normanton, Tom
Vaughan, Dr. Gerard


Jones, Arthur (Daventry)
Nott, John
Viggers, Peter


Jopling, Michael
Onslow, Cranley
Waddington, David


Joseph, Rt. Hn. Sir Keith
Orr, Capt. L. P. S.
Wakeham, John


Kaberry, Sir Donald
Osborn, John
Walder, David (Clitheroe)


Kellett-Bowman, Mrs. Elaine
Page, Rt. Hn. Graham (Crosby)
Walker-Smith, Rt. Hn. Sir Derek


Kershaw, Anthony
Page, John (Harrow, W.)
Wall, Patrick


Kimball, Marcus
Parkinson, Cecil (Hertfordshire, S.)
Walters, Dennis


King, Evelyn (Dorset, S.)
Pattie, Geoffrey
Warren, Kenneth


King, Tom (Bridgwater)
Peyton, Rt. Hn. John
Watt, Hamish


Kirk, Peter
Pink, R. Bonner
Weatherill, Bernard


Kitson, Sir Timothy
Price, David (Eastleigh)
Wells, John


Knox, David
Prior, Rt. Hn. James
West, Rt. Hn. Harry


Lamont, Norman
Raison, Timothy
Wiggin, Jerry


Lane, David
Rathbone, Tim
Wigley, Dafydd (Caernarvon)


Langford-Holt, Sir John
Rawlinson, Rt. Hn. Sir Peter
Wilson, Gordon (Dundee, E.)


Latham, Michael (Melton)
Redmond, Robert
Winterton, Nicholas


Lawrence, Ivan
Rees, Peter (Dover &amp; Deal)
Wood, Rt. Hn. Richard


Lawson, Nigel (Blaby)
Rees-Davies, W R.
Worsley, Sir Marcus


Le Marchant, Spencer
Reid, George
Young, Sir George (Ealing, Acton)


Lester, Jim (Beeston)
Rhys Williams, Sir Brandon



Lewis, Kenneth (Rtland &amp; Stmford)
Ridley, Hn. Nicholas
TELLERS FOR THE AYES:


Lloyd, Ian (Havant &amp; Waterloo)
Ridsdale, Julian
Mr. W. Benyon and


Loveridge, John
Rifkind, Malcolm
Mr. Adam Butler.


Luce, Richard
Rippon, Rt. Hn. Geoffrey





NOES


Abse, Leo
Blenkinsop, Arthur
Carter, Ray


Allaun, Frank
Boardman, H.
Carter-Jones, Lewis


Archer, Peter
Booth, Albert
Castle, Rt. Hn. Barbara


Armstrong, Ernest
Boothroyd, Miss Betty
Clemitson, Ivor


Ashley, Jack
Bottomley, Rt. Hon. Arthur
Cocks, Michael


Ashtor, Joe
Boyden, James (Bishop Auckland)
Cohen, Stanley


Atkins, Ronald
Bradley, Tom
Coleman, Donald


Atkinson, Norman
Broughton, Sir Alfred
Colquhoun, Mrs. M. H.


Bagier, Gordon, A. T.
Brown, Bob (Newcastle upon Tyne, W.)
Conlan, Bernard


Barnett, Joel (Heywood &amp; Royton)
Brown, Hugh D. (Glasgow, Provan)
Cook, Robert F. (Edinburgh, C.)


Bates, Alf
Brown, Ronald (H'kney, S. &amp; Sh'ditch)
Cox, Thomas


Baxter, William
Buchan, Norman
Craigen, J. M. (G'gow, Maryhill)


Beith, A. J.
Butler, Mrs. Joyce(H'gey, WoodGreen)
Cronin, John


Benn, Rt. Hn. Anthony Wedgwood
Callaghan, Jim (M'dd'ton &amp; Pr'wch)
Crosland, Rt. Hn. Anthony


Bennett, Andrew F. (Stockport, N.)
Campbell, Ian
Cryer, G. R.


Bidwell, Sydney
Cant, R. B.
Cunningham, G.(Isl'ngt'n, S &amp; F'ab'ry)


Bishop, E. S.
Carmichael, Neil
Cunningham, Dr. John A. (Whiteh 'v' n)







Dalyell, Tam
Janner, Greville
Rees, Rt. Hn. Merlyn (Leeds, S.)


Davidson, Arthur
Jay, Rt. Hn. Douglas
Richardson, Miss Jo


Davies, Bryan (Enfield, N.)
Jeger, Mrs. Lena
Roberts, Albert (Normanton)


Davies, Denzil (Llanelli)
Jenkins, Rt. Hn. Roy (B'ham, St'fd)
Roberts, Gwilym (Cannock)


Davies, Ifor (Gower)
Johnson, James (K'ston upon Hull, W)
Robertson, John (Paisley)


Davis, Clinton (Hackney, C.)
Johnson, Walter (Derby, S.)
Roderick, Caerwyn E.


Deakins, Eric
Johnston, Russell (Inverness)
Rodgers, George (Chorley)


Dean, Joseph (Leeds, W.)
Jones, Barry (Flint, E.)
Rodgers, William (Teesside, St'ckton)


de Freitas, Rt. Hn. Sir Geoffrey
Jones, Dan (Burnley)
Rooker, J. W.


Delargy, Hugh
Jones, Gwynoro (Carmarthen)
Roper, John


Dell, Rt. Hn. Edmund
Jones, Alec (Rhondda)
Ross, Stephen (Isle of Wight)


Dempsey, James
Judd, Frank
Ross, Rt. Hn. William (Kilmarnock)


Doig, Peter
Kaufman, Gerald
Rowlands, Edward


Dormand, J. D.
Kelley, Richard
Sandelson, Neville


Douglas-Mann, Bruce
Kerr, Russell
Sedgemore, Bryan


Duffy, A. E. P.
Kilroy-Silk, Robert
Selby, Harry


Dunn, James A.
Kinnock, Neil
Shaw, Arnold (Redbridge, Ilford, S.)


Dunnett, Jack
Lambie, David
Sheldon, Robert (Ashton-under-Lyne)


Dunwoody, Mrs. Gwyneth
Lamborn, Harry
Shore, Rt. Hn. Peter(S'pney &amp; P'plar)


Eadie, Alex
Lamond, James
Short, Rt. Hn. E. (N'ctle-u-Tyne)


Edelman, Maurice
Lawson, George (Motherwell &amp; Wlshaw)
Short, Mrs. Renée (W'hamp'n, N.E.)


Edge, Geoff
Leadbitter, Ted
Silkin, Rt. Hn. S.C.(S'hwark, Dulwich)


Edwards, Robert (W'hampton, S.E.)
Lee, John
Sillars, James


Ellis, John (Brigg &amp; Scunthorpe)
Lastor, Miss Joan (Eton &amp; Slough)
Silverman, Julius


Ellis, Tom (Wrexham)
Lewis, Arthur (Newham, N.)
Skinner, Dennis


English, Michael
Lewis, Ron (Carlisle)
Small, William


Ennals, David
Lipton, Marcus
Smith, Cyril (Rochdale)


Evans, Fred (Caerphilly)
Loughlin, Charles
Smith, John (Lanarkshire, N.)


Evans, Ioan (Aberdare)
Loyden, Eddie
Snape, Peter


Evans, John (Newton)
Lyons, Edward (Bradford, W.)
Spearing, Nigel


Ewing, Harry (St'ling, Fkirk &amp; G'm'th)
Mabon, Dr. J. Dickson
Spriggs, Leslie


Faulds, Andrew
McCartney, Hugh
Stallard, A. W.


Fernyhough, Rt. Hn. E.
McElhone, Frank
Steel, David


Fitch, Alan (Wigan)
MacFarquhar, Roderick
Stewart, Rt. Hn. M. (H'eth, Fulh'm)


Fitt, Gerard (Belfast, W.)
McGuire, Michael
Stoddart, David (Swindon)


Flannery, Martin
Mackenzie, Gregor
Stonehouse, Rt. Hn. John


Fletcher, Raymond (Ilkeston)
Maclennan, Robert
Stott, Roger


Fletcher, Ted (Darlington)
McMillan, Tom (Glasgow, C.)
Strang, Gavin


Foot, Rt. Hn. Michael
McNamara, Kevin
Strauss, Rt. Hn. G. R.


Ford, Ben
Madden, M. O. F.
Summerskill, Hn. Dr. Shirley


Forrester, John
Mahon, Simon
Swain, Thomas


Fowler, Gerry (The Wrekin)
Mallalieu, J. P. W.
Taverne, Dick


Fraser, John (Lambeth, Norwood)
Marks, Kenneth
Thomas, Jeffrey (Abertillery)


Freeson, Reginald
Marquand, David
Thorne, Stan (Preston, S.)


Freud, Clement
Marshall, Dr. Edmund (Goole)
Thorpe, Rt. Hn. Jeremy


Galpern, Sir Myer
Mason, Rt. Hn. Roy
Tierney, Sydney


Garrett, John (Norwich, S.)
Mayhew, Christopher (G'wh, W'wch, E)
Tinn, James


Garrett, W. E. (Wallsend)
Meacher, Michael
Tomlinson, John


George, Bruce
Mellish, Rt. Hn. Robert
Tomney, Frank


Gilbert, Dr. John
Mendelson, John
Torney, Tom


Ginsburg, David
Mikardo, Ian
Tuck, Raphael


Golding, John
Millan, Bruce
Tyler, Paul


Gourlay, Harry
Miller, Dr. M. S. (E. Kilbride)
Urwin, T. W.


Graham, Ted
Milne, Edward
Wainwright, Edwin (Dearne Valley)


Grant, George (Morpeth)
Mitchell, R. C. (S'hampton. Itchen)
Wainwright, Richard (Colne Valley)


Grant, John (Islington, C.)
Molloy, William
Walden, Brian (B'm'ham, Ladywood)


Griffiths, Eddie (Sheffield, Brightside)
Moonman, Eric
Walker, Harold (Doncaster)


Grimond, Rt. Hn. J.
Morris, Alfred (Wythenshawe)
Walker, Terry (Kingswood)


Hamilton, James (Bothwell)
Morris, Charles R. (Openshaw)
Weitzman, David


Hamilton, William (Fife, C.)
Moyle, Roland
Wellbeloved, James


Hamling, William
Murray, Ronald King
White, James (Glasgow, Pollok)


Hardy, Peter
Newens, Stanley (Harlow)
Whitehead, Phillip


Harrison, Walter (Wakefield)
Oakes, Gordon
Whitlock, William


Hart, Rt. Hn. Judith
Ogden, Eric
Willey, Rt. Hn. Frederick


Hattersley, Roy
O'Halloran, Michael
Williams, Alan (Swansea, W.)


Hatton, Frank
O'Malley, Brian
Williams, Alan Lee (Hvrng, Hchurch)


Healey, Rt. Hn. Denis
Orbach, Maurice
Williams, Rt. Hn. Shirley (H'f'd &amp; St'ge)


Heffer, Eric S.
Ovenden, John
Williams, W. T. (Warrington)


Hooley, Frank
Owen, Dr. David
Wilson, Alexander (Hamilton)


Hooson, Emlyn
Padley, Walter
Wilson, Rt. Hn. Harold (Huyton)


Horam, John
Palmer, Arthur
Wilson, William (Coventry, S.E.)


Howell, Denis (B'ham, Small Heath)
Pardoe, John
Winstanley, Dr. Michael


Howells, Geraint (Cardigan)
Park, George (Coventry, N.E.)
Wise, Mrs. Audrey


Huckfield, Leslie
Parker, John (Dagenham)
Woodall, Alec


Hughes, Rt. Hn. Cledwyn (Anglesey)
Parry, Robert
Woof, Robert


Hughes, Mark (Durham)
Pendry, Tom
Wrigglesworth, Ian


Hughes, Robert (Aberdeen, North)
Perry, Ernest G.
Young, David (Bolton, E.)


Hughes, Roy (Newport)
Phipps, Dr. Colin



Hunter, Adam
Prescott, John
TELLERS FOR THE NOES:


Irvine, Rt. Hn. Sir A. (L'p'I, EdgeHI)
Price, Christopher (Lewisham, W.)
Mr. Joseph Harper and


Irving, Rt. Hn. Sydney (Dartford)
Price, William (Rugby)
Mr. Laurie Pavitt.


Jackson, Colin
Radice, Giles

Question accordingly negatived.

Mr. Joel Barnett: I beg to move, as a manuscript amendment, in page 6, line 31, leave out three-twentieths' and insert 'one-sixth'.
This might be an appropriate moment to move this amendment, which arises out of a point relating to new Clause 14. Before it was carried by the House, I mentioned that the new clause was technically defective and would have created a problem with tapering fractions. The fraction of three-twentieths needs amendment because it provides for the small companies relief to be tapered off in a straight line as profits mount from the lower figure to the higher ceiling figure. The fraction is a product of the difference between the small companies rate and the ordinary rate and of the difference between the lower figure and the higher figure for small companies relief. If it were left at three-twentieths, in spite of the changes made yesterday, the tapering would be distorted.

Mr. David Howell: We are grateful to the Chief Secretary for adding technical perfection to our humble endeavours.

Amendment agreed to.

Clause 12

PAYMENTS IN ADDITION TO ADVANCE CORPORATION TAX DUE IN FINANCIAL YEAR 1974.

Mr. Robert Carr: I beg to move Amendment No. 116, in page 6, line 38, leave out Clause 12.

Mr. Speaker: It will be convenient to discuss at the same time Amendment No. 115, in page 6, line 41, leave out 'half' and insert 'quarter'.

Mr. Carr: This is an important amendment, so important that I would have thought, after what we heard from him last night, that the Chancellor of the Exchequer might have attended the debate if not contributed to it. But apparently he does not deign to grace the House with his presence—

Mr. Joel Barnett: Really.

Mr. Carr: The Chief Secretary mutters "Really", but the Chancellor cannot "really" expect to descend upon the House as he did last night, make the sort of wildly exaggerated. inaccurate

and irresponsible speech that he made and then, when we discuss the amendment which is the guts of what he was talking about—if it had any guts—not turn up either to listen to the debate or to participate in it.
This is not the way to treat the House and it is not the way in which a responsible Chancellor should behave. But the sort of speech he made last night was not a responsible speech.

Mr. George Cunningham: Get on with it.

Mr. Carr: I will get on with it at my own pace and in my own way, just as the Chancellor did last night—and I think that my way will be more acceptable.
It is important to consider what the Chancellor said in connection with this amendment because it involves a considerable sum. Because of this, although I shall express some strong views about the merits of the amendment, for reasons which I will explain, before I decide whether to advise my hon. Friends to support the amendment it is important that the House should hear the Government's views—and, I should have thought, the Chancellor's personal views—on my arguments. The amendment relates to the balance of the Budget and the demand in the economy and the needs of the economy in a way which our previous amendments have not done.
The Chancellor last night tried to say that we had passed amendments which in total would add £500 million to demand in the economy or, rather, to the Government's borrowing requirement. He made it clear that in coming to that figure he was taking this amendment into account although it had not been reached, let alone argued about.
It needs to be put on record that the cost of the amendments which we have so far succeeded in carrying, in terms of effect on expenditure in the current year and therefore on demand and the borrowing requirement in the current year, amount not to £500 million but to about £50 million. In other words, we have a decimal-point Chancellor, one who gets the decimal point in the wrong place.
The only amendments of substance which we have carried which affect the


expenditure and the borrowing requirement and, therefore, the balance of the Budget in this year are those which raised the threshold profit limit at which small businesses begin to move up to paying a full rate of corporation tax, which on the Chancellor's own figures will cost £14 million, and the restoration of £2,000 as the threshold limit at which the investment income surcharge becomes operative, which—again on the Chancellor's figures—will cost £40 million. Those two add up to £54 million.
In addition, there was the amendment which we carried to reduce the rate of duty on charity pools. We were told by the Financial Secretary that the cost of abolishing the duty altogether would be £7 million. In fact we moved not to abolish it but to reduce it from 40 per cent. to 33⅓ per cent. If abolishing the duty altogether would cost only £7 million, the reduction from 40 per cent. to 33⅓ per cent. must cost far less than £7 million. Let us be very generous and say that it would cost £4 million.
One is left, therefore, with a total sum not of £500 million, which the Chancellor was talking about last night, but of £58 million at the outside in terms of the effect on this year's expenditure and, therefore, this year's balance on this year's borrowing requirement. That needs to be stated clearly in view of the Chancellor's wildly inaccurate and irresponsible speech. It particularly needs to be brought out that the amendment that we passed refusing the Government retrospective powers on, value added tax cannot possibly come into this year's calculations. That is on the evidence presented by the Government themselves, first to the Standing Committee and then to the House.
This matter first came up in Committee a good many weeks ago and the Government were unable then to give any accurate information at all about what the total eventual costs might be in certain circumstances. It was very strange that right at the end of our series of debates on this subject the Chancellor was suddenly to give a long string of apparently precise amounts which would have to be repaid, if our amendment was carried, to various sectors of industry, all of which total £120 million if my calculations are right. I find that diffi-

cult to accept. I find it very strange that for all these weeks the Government have been unable to give a precise amount but suddenly, at the last moment, can be specific about it.
Let us not argue about that. Let us, however, look at the timing of this matter, because it was in relation to the timing of this year's borrowing requirement and this year's Budget balance that the Chancellor was adding up these great sums. We were told by the Financial Secretary that if we denied the Government—I am glad that the House did deny it to them—their demand for retrospective powers without going through any proper processes of law, the matter would first have to go to the Court of Appeal and then might have to go to the House of Lords.
If I remember correctly, the Financial Secretary told us that that was bound to take at least a year. It is quite clear, therefore that it will be at least a year before this matter can be settled one way or the other. It is at least likely that the court might in the end find that the original interpretation of the Bill was the right one, so that the repayment might not arise at all; but if it were to arise it might not arise for at least a year and probably longer.
Then, as the Financial Secretary told us, if the courts finally hold against the interpretation which we wish to put and which we thought the Act carried in the first place, the process of repayment, we were told, would be so tortuous, complicated and lengthy that it would take months and months. [Interruption.] The Chief Secretary says "Quite right." If that is the case, however, it is quite clear that by the time the legal processes and these great tortuous processes have been gone through, this money will not find its way into the economy or add one penny to the balance of demand in the economy or to the borrowing requirement in the current financial year.
Therefore, it was a wholly spurious claim by the Chancellor to throw that in, as he did last night, to make up his ridiculous, irresponsible and wholly untruthful addition.
6.45 p.m.
The total cost of the amendments that we have passed, therefore, in terms of their effect on this year's Budget judgment and borrowing requirement is about


£50 million to £60 million, obviously well within the normal margin of error of estimation and calculation. That degree of tax remission cannot possibly be said to upset the overall balance of the Chancellor's Budget or to affect the borrowing requirement in any meaningful way because it is so far within the normal, well-known errors of calculation and estimation in these matters.
When we come to this amendment, however, the position is indeed different. That is why it is more than usually important to hear and to consider the Government's full arguments about it. As I have said, I should have thought that it was important in any event, but particularly in view of what he said last night, that the Chancellor should himself have come to listen to the debate, if not to participate in it.
The House is put in an extremely difficult position in making up its mind about the amendment. We in the House of Commons have to take our decision today, but we already know that within a week the Chancellor will be coming to the House to tell us why and how he now believes his original Budget judgment to have been proved wrong, what his new judgment will be and how he proposes to implement that new judgment.
We have to take this very important decision today knowing that within a week the Chancellor will be telling us that his judgment, which he tries to say we must not upset by being irresponsible, was wrong. But we have to make our decision not knowing what his view is about the wrongness of his present judgment, which we are told it would be irresponsible in any way to upset.
I believe that it is wrong of the Chancellor to have allowed his new Budget and the passage of the Finance Bill to have so nearly coincided, as he has allowed them to do, and not to have made his interim Budget Statement in the House before we had finished with this Finance Bill. He is allowing—I cannot help suspecting that he is deliberately allowing—the House to complete the passage of the Finance Bill and then, if I understand the arrangements aright, literally on the following day, when we have had to make all our decisions, he will tell us that the overall economic judgment on which the House has to decide on the Bill clause by clause was in any case wrong, and he

will assure us that he now believes his different judgment to be the right one.
We all understand the need for interim statements and interim Budgets of varying degrees of "mini-ness" or "maxi-ness" at various times of the year, and it is not the prerogative of one party over another. We accept that. Sometimes it is impossible for a Chancellor who has to make an interim statement to do so at any time which coincides with the passage of the Finance Bill.
I am very glad to see that the Chancellor has now taken his seat on the Government Front Bench. Before his right hon. and hon. Friends tell him about it, I want to make clear to him that I have been criticising him very heavily for his absence.

Mr. Joel Barnett: We would not have told him.

Mr. Carr: That is a matter for the judgment of the Chief Secretary.

The Chancellor of the Exchequer (Mr. Denis Healey): With respect, the right hon. Gentleman will be aware that the decisions which he and his Liberal and Ulster Unionist colleagues took yesterday to defeat the Government on major matters of public expenditure have inevitably made it necessary for me to make some revisions in plans that I was preparing for next week. I do not apologise to the right hon. Gentleman for taking account of the decisions that he forced through the House yesterday. But I shall be delighted to answer any questions he has to put to me if he has the courtesy to put them again in my presence.

Mr. John Nott: I am sorry to interrupt the debate, Mr. Speaker, but may I ask whether it is the normal practice for a Member of the House, however important and distinguished, to walk into the House and immediately make an interruption from the Dispatch Box without having heard a word of the debate?

Mr. Speaker: That is not a matter for the Chair. If the right hon. Member for Carshalton (Mr. Carr) gives way, the Chancellor of the Exchequer is entitled to interrupt.

Mr. Carr: I gave way to the Chancellor.

Mr. Tam Dalyell: On a point of order, Mr. Speaker. It will be within the recollection of the House that last year the right hon. Member for Altrincham and Sale (Mr. Barber) the then Chancellor, was an occasional visitor to our proceedings.

Mr. Nott: That is irrelevant.

Mr. Carr: I am sorry now that I gave way to the Chancellor. I think that what he said just now was spurious nonsense. It was highly discourteous, not to me—that does not matter at all—but to the House as a whole. Had he been here—I should have thought that after the intervention he made last night he had some duty, out of courtesy to the House, if not a responsibility, to be here—he would have heard the reply I made. I do not think that I should bore the House or take up its time by repeating it.
Let me say just this to the right hon. Gentleman. What I said, which is a fact, was that he got the costs wrong last night by a decimal point. He multiplied by no less than 10 the effect of the amendments which we carried on this year's expenditure and this year's borrowing requirement. He must know that very well. I cannot believe that he does not.
I was complaining that I think that, as it so happens, the Chancellor's need to introduce an interim Budget so closely coincides—this need has been known for several weeks; it has not been kept secret—with the last stages of the passage of our annual Finance Bill that it would have been not only for the convenience of the House but for the proper conduct of our parliamentary system of government for the Chancellor to have made his interim statement this week so that we could have taken his new judgment into account in deciding how we should vote on this and other amendments to the various clauses in the Finance Bill. That applies perhaps more strongly to this clause than to any other.
If I had to give one overriding priority in the cause of protecting jobs in the future, of ensuring our capacity as a nation to maintain and sustain full employment and to raise the efficiency and the capacity of the nation's productive effort, on which our ability to maintain full employment depends, I would say that that priority at this moment in our history would be to do all we could

to encourage a greater volume of high-quality investment in British manufacturing industry.
Our history over the post-war era—this is true if we go back considerably before the wartime era; it was true over most of this century—shows that there has been a noticeable tendency in Britain compared with other major industrial countries which are our chief competitors in world markets to invest on a smaller scale in modern productive equipment.
As every year has passed, the need to stimulate investment has become more and more urgent. This is not easy to do, as Governments of both parties have found since the war. Since the war Governments of both parties have tried various forms of tax incentive, both nationally and regionally. We have not found it at all easy to stimulate British industry into a level of investment comparable to that in other major industrial countries.
When we were in power from 1970 to the early part of this year we made renewed attempts to stimulate investment. We adopted various methods, chiefly by trying to put the need to expand the economy on a higher priority than any other post-war Government had done. It was difficult to start. It was much slower to start than we had hoped or indeed expected. However, finally by last summer there were very clear indications of a new investment surge in Britain. Then came the autumn, the oil crisis and the miners' dispute. It was, therefore, a very tender plant newly sprung up which needed most careful culturing. As I said in an earlier debate, instead of pouring fertiliser on the tender plant the Government in their Budget poured weed-killer on it.
If we are to have investment, although there may be all sorts of other conditions it is clear that two of the essential ones are that industry should have both cash and confidence. The Chancellor has taken away the cash and the Secretary of State for Industry is chief among Ministers in taking away industry's confidence.
In his Budget the Chancellor took no less than £1,100 million out of industry's cash flow in the current year. That was an enormous sum to remove from industry's liquidity in one year, in a year


when we want to encourage and nurture the new growing plant of a surge in investment. The amendment would put £300 million of that £1,100 million back into industry's current liquidity.

The Paymaster-General (Mr. Edmund Dell): It would be useful to know how the right hon. Gentleman arrives at the figure of £1,100 million, if he wishes me to comment.

Mr. Carr: I shall be interested to hear it my sum is wrong. I did not think I would have to work it out again in the House. I have worked it out once. I shall try to work it out again. I shall seek to exercise my right of reply at the end of the debate. I shall say something about the figure then in the light of what the right hon. Gentleman says. If he says that I am wrong in saying that the figure is £1,100 million, I should like to know what his account of it is.
What I am taking into account is the £300 million which is what we are now talking about. I am talking about the fact that corporation tax was fixed at 52 per cent. rather than the expected 50 per cent. I know that we could have an argument about that because the 50 per cent. was never finally settled. We are also taking into account that industry is to be expected—as I have said before, I would not necessarily quarrel with this if it was the only thing—to pay the major part of the cost of increased pensions in the employers' contributions to national insurance. These three imposts, which all spring directly from the Chancellor's Budget Statement, add up to a very large total, which I had thought was about £1,100 million. If the Paymaster-General would like to put further arithmetic before us in due course, I should like to have it. However, I do not think he can deny that it is a large sum.
7.0 p.m.
We are seeking to put back £300 million of that sum into industry because we believe that the priority in protecting jobs in the future and in raising the efficiency and capacity of our productive effort lies in doing all we can to raise the level of new, high-quality productive investment.
Therefore this amendment, if carried, would add £300 million to the Government's borrowing requirement this year. That cannot be disputed. It is important to say in passing that this would reduce

next year's borrowing requirement by the same amount, because I am sure there is no dispute that what we are talking about is not remission of tax but a delay in the time of paying that tax. Therefore, if the change is brought in this year it will add £300 million to this year's borrowing requirement but it will reduce next year's borrowing requirement.

Mr. Healey: And it reduces company liquidity next year.

Mr. Carr: Therefore, to some extent we are making a judgment as to when it is most necessary both in real cash terms and also in terms of confidence to leave industry with the cash. Our judgment, arrived at after a great deal of discussion with many people in industry, is very strongly that the need is greater now than it will be next year. It is greater this year because we believe that the Chancellor seriously underestimated the liquidity problems of industry this year not only to carry on their business but in terms of investment programmes.
I believe too that in this we can easily underestimate the confidence factor which enters so largely into the investment decisions of companies, because, as capital equipment gets larger in scale and becomes more complicated, decisions are taken further and further ahead of the time when the money is actually spent and when machinery comes into the factory and is operated. Therefore, we are not so worried about the level of investment this year because that springs from decisions taken last year and even before last year. What we are worried about is the depression of new investment decisions being taken this year, to be followed up later. We believe that if companies felt less hard-pressed in liquidity this year, if they felt more confidence in their liquid position this year, they would be taking more progressive, larger-scale future investment decisions this year. I agree that that is a matter of judgment.

Sir John Hall: Does not my right hon. Friend agree that one of the problems that also arises from this is that companies which tend to budget ahead, probably in September or October of the previous year, and also calculate their cash flow have to take into account the additional impost or forced loan that the Bill now intends to impose? The effect might well be to make them defer


investment decisions already taken in the previous year.

Mr. Carr: I agree with my hon. Friend that it could cause the deferment of decisions already taken and I certainly believe that that is a further reason. While I accept it as another reason, I still believe that the climate of investment decision-taking this year for the future is the most serious thing we have to worry about. Meanwhile I would say to the Chancellor that although the Government's borrowing requirement would be increased this year by £300 million, it would be reduced next year, and that £300 million would be put back into the economy now in a way least likely to cause any immediate inflationary effect and in a way most likely to produce the changes in developments in our economy which we most need both to tackle inflation and solve the balance of payments and also to protect full employment in the long run.
Those are exactly the reasons why we believe this to be a most important amendment, but I accept that it is an amendment which, unlike all the others we have made, would affect the immediate balance of the Chancellor's budget judgment, his borrowing requirement and all the rest of it. That is why it is so difficult for us, particularly when we know that within a few days the right hon. Gentleman will be telling us what his new judgment is to be.
All I will say to the Chancellor at this stage is that I hope he will address himself most seriously to the need for an injection of liquidity into industry to protect jobs in the future. I hope he understands that if he advises us that the amendment should not be accepted because if the Opposition pressed it they would be exercising a major decision on current Budget judgment, and if I then decided to advise my right hon. and hon. Friends not to press it but then next week, after this Finance Bill is out of the way, the Chancellor came forward with a package which was reflationary on consumer demand and did nothing adequately to stimulate the essential needs of industry, on which the future protection of jobs depends, we should condemn him with all the power at our command.
I feel therefore that we should now listen to other arguments in this debate

and in due course, when we have heard what the Chancellor has to say—I hope without any lack of respect for his right hon. Friend that it will be the Chancellor himself—on these serious arguments, we shall wish to make up our minds how to respond.

ROYAL ASSENT

Mr. Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts:

1. Solicitors (Amendment) Act 1974.
2. Education (Mentally Handicapped Children) (Scotland) Act 1974.
3. Northern Ireland Act 1974.
4. Parks Regulation (Amendment) Act 1974.
5. Fife County Council Order Confirmation Act 1974.
6. Spanish and Portuguese Jews' (Golders Green) Burial Ground Act 1974.
7. London Transport Act 1974.
8. Orkney County Council Act 1974.
9. British Airports Authority (Longford River) Act 1974.
10. Old London Road, Hythe, Burial Ground Act 1974.

FINANCE BILL

Question proposed, That the amendment be made.

Mr. Healey: I apologise to the House and the right hon. Member for Carshalton (Mr. Carr) for not having been here at the beginning of his speech although I made it clear that there were reasons why that was so; and I fear that after this intervention I shall have to return to my main duty which is to seek to make decisions more likely to have the most favourable effect on the economy in the current year. I intervene at this moment because the right hon. Gentleman very fairly pointed out that it would be of critical importance to him and his right hon. and hon. Friends, in deciding whether or not to press this amendment, to have some view of the effect of the kind of decisions I now face.
I do not wish to deal with the main argument he put as to the effect of the


amendment he proposes on business confidence and so on. My right hon. Friend the Paymaster-General will deal with that, but if he wishes me to do so, within the limits of the secrecy and privacy which all Chancellors have to preserve at times like this, I shall try to explain in the least partisan terms I can the possible impact of decisions taken by the House yesterday and sought by the Opposition today on the kind of decisions which I have to take in the next few days and communicate to the House next week. If that is the right hon. Gentleman's wish I shall deal with that specific point.
As the House knows, I plan to introduce a Budget, if the people of this country allow me to do so, in the autumn which will be followed by a Finance Bill. That Bill will include detailed legislation to implement some of the decisions which were taken in the major Budget this year. The question to which I have now to address myself is whether it is desirable for me to take any steps to modify the nature of the steps I took in March so as to affect the economy favourably during the current financial year. The right hon. Gentleman will well know that any decisions I take in November are unlikely to have a major effect on what happens in the current financial year. They will be directed more, if anything, to what happens in the financial year 1975–76.
In considering whether it is necessary, for example, to take immediate steps to stimulate demand or business confidence I have to consider several factors. One is the latest information I can obtain on the likely path of the economy over the next nine months. I now have the best information I shall ever be able to get, though it is not very good, nevertheless.
Secondly, I have to consider the possible reaction both of domestic opinion—industry, labour and consumer opinion—and foreign opinion on any measures I propose to introduce. In determining the likely reaction of opinions to my measures I have to think of the demand effect of any measures, of the effect on the balance of payments, the effect on employment, and also, to a very large degree, the effect of any possible measures I may take on the public sector borrowing requirement this year.
The decisions the House took yesterday, and which the right hon. Gentleman successfully pressed it to take, have the following effects so far as I am able to discover. The decision on the investment income surcharge is unlikely to affect the borrowing requirement this year, but it will increase it by £40 million in the next financial year. The decision to relieve small businesses from certain corporation tax obligations would increase the borrowing requirement by £15 million this year and £15 million next. The decision on VAT hiring agreements would increase the borrowing requirement this year by £120 million. This is the best advice I am able to give the House. Perhaps the right hon. Gentleman has better advice, but I concede to him that if there are a large number of legal actions in connection with the repayments some of the repayments might be pushed into the next financial year. The best advice that I can obtain, however, is that the £120 million refund which the House decided upon yesterday would affect the public sector borrowing requirement this year to the extent of £120 million. The decision on pools betting duty would increase the public sector borrowing requirement by £1 million this year and £1 million next.
The ACT decision which the right hon. Gentleman is now considering would increase the borrowing requirement by £300 million this year but reduce it, as he quite rightly says, by £300 million next year. The decision which he sought but failed to persuade the House to accept a moment ago to reduce the rate of corporation tax for small firms would have increased the borrowing requirement by £15 million this year and £15 million next year. So the total effect on the borrowing requirement of carrying all the amendments he seeks would this year be £451 million. I would have to take account of that sum in approaching any other decisions which might be desirable in a package next week.
I cannot tell the right hon. Gentleman now what those decisions might be, but he must understand that he is in effect asking for an increase in the public sector borrowing requirement this year of £300 million if he wants this amendment made. As he conceded, this would gravely restrict my freedom of manoeuvre.


He has a perfect right, if he believes that this proposal must have an absolute priority over all the other possible ways of dealing with the many problems facing men and women in this country and facing the economy, to press his amendment to a vote. He must understand, if he does so, that on top of the amendments he has already succeeded in pressing that will leave me with very little room for manoeuvre to do many of the desirable things which, if the economic situation permits me to do so. I and the House would much prefer.

Mr. Carr: The Chancellor has given us information which it is important we should get right. The information he has given us about the VAT refund contradicts the advice given by the Financial Secretary. The Financial Secretary went out of his way to say, among other things, that the appeals procedure could take at least a year. That was one of the Financial Secretary's main arguments with which he tried to dissuade the Committee and subsequently the House from making amendments. He said that to go to the Court of Appeal and perhaps beyond would take at least a year and probably longer. Thereafter, assuming that the case went the wrong way from the Exchequer's point of view, and the repayments had to be made, the actual procedure of repayment would be extremely tortuous, difficult and long drawn out. In other words, his argument was that whether the amount be £120 million or the tens of millions of pounds that he first spoke about, the money could not be paid out in this financial year.

7.15 p.m.

Mr. Healey: I apologise if I misunderstood the point the right hon. Gentleman was making earlier. The Government have not yet decided whether to follow the recommendations of the right hon. Gentleman and encourage the Customs and Excise to appeal against the judgment of the tribunal. One of the reasons they are reluctant to do so, and this is what my hon. Friend made clear in Committee and on the Floor of the House yesterday, is that it would impose a long delay, and, if the appeal went against the Government, further delays would follow before the repayments were made.
If we chose to take that course, and we might be compelled to do so in the

light of the vote by the House yesterday, that £120 million might be pushed into next year. If we chose, for reasons which I would then explain to the House, not to appeal in that way, the procedure of repayments would probably take place during the current financial year. However, I assure the right hon. Gentleman—and I have made this point in public in the last 24 hours—that the decision that he and his Liberal and Unionist colleagues forced through the House yesterday has made me seriously consider whether to appeal against the decision of the tribunal, if only to ensure that no fiscal action followed from what I regard as a disastrous vote last week until an autumn Budget could be put before the House by a Government with a real majority.

Mr. Bruce-Gardyne: The Chancellor said that he would answer questions, so before he sits down will he clear up one point? He seemed to imply that any decisions he took in an autumn Budget could not have an effect on the economy during the current financial year—

Mr. Healey: indicated dissent—

Mr. Bruce-Gardyne: Will the right hon. Gentleman assure the House that he is not suggesting that any decisions he might take next week, although clearly they would have an effect on the borrowing requirement, could not conceivably have a genuine and significant effect on the course of the economy during the rest of the current financial year?

Mr. Healey: The simple answer is "No".

Motion made, and Question proposed, That the debate be now adjourned.—[Mr. Mellish.]

TOWER OF LONDON (EXPLOSION)

7.18 p.m.

The Secretary of State for the Home Department (Mr. Roy Jenkins): I have been asked to make a statement about the explosion at the Tower of London this afternoon. I am naturally, very willing to accede to the request, although at this stage there is inevitably very little I can add to the news which has been published. I very much regret to say that this was one of the more serious incidents we have experienced.
At 2.04 this afternoon a bomb, which is estimated as weighing between 10 lb. and 14 lb. exploded at the White Tower. No warning was given. I am sorry to have to inform the House that 37 people, of whom five were children, were injured, a number of them seriously. One young woman has since died. Ten of the 37 have been discharged from hospital. There was little damage to the structure of the Tower, although considerable damage to the contents.
On behalf of the whole House, I am sure, I wish to express our deepest sympathy with the victims of this further horrible outrage.

Sir Keith Joseph: My right hon. and hon. Friends will wish to be associated with the Home Secretary's expressions of horror.
I know that it is very early to ask the right hon. Gentleman any questions, but will he undertake to study whether perhaps the incident is a new departure? He tells us that there was no warning. We have experienced an attack upon this palace and an attack upon military headquarters. Here is a wanton attack on something that has no connection with the Government or official apparatus. Will the right hon. Gentleman undertake to study whether this is a new departure, and to study its implications?
I had a lesser point about co-operation between the City Police and the Metropolitan Police, but I cannot ask it because the right hon. Gentleman has told us that there was no warning. Therefore, I rest on the one question I have put to him.

Mr. Jenkins: I gladly undertake to study urgently the point which the right hon. Gentleman has put to me. The absence of warning was unusual, and led to the attack being more indiscriminate than we have mostly experienced, and this, together with the choice again of a historic, almost unique building today for the attack, raises the question of a possible new pattern. I assure the right hon. Gentleman that we shall study it as urgently as we can.
With regard to the question the right hon. Gentleman half raised, co-operation in that sense did not arise, but the emergency services were able to be on the spot very quickly and to fulfil the rôle

they always fulfil magnificently on these occasions, for which we are all so indebted to them.

Mr. Jeremy Thorpe: May we be associated with the sense of horror and shock, and share in the expressions of sympathy that the right hon. Gentleman has expressed. It is perhaps not a question to put to the right hon. Gentleman, but it is one that the House would like him and perhaps everybody to put to the people who perpetrate these horrors: what political objective do they think they are likely to achieve in bombing innocent children on holiday? Does he agree that if one thing has become quite plain it is that the succession of outrages is not likely to change our views on any political objective? In fact, it is likely to be self-defeating. The sooner that is realised by those concerned, the better.

Mr. Jenkins: I agree. It is impossible to imagine what rational political motive could conceivably be thought to be served by such attacks.

Mr. Christopher Tugendhat: May I, too, associate myself with the expressions of grief and condolence of the Home Secretary? In this I should like to associate the right hon. Member for Stepney and Poplar (Mr. Shore), as he cannot speak on these occasions and his constituency is as much affected as mine, if not more.
Does the Home Secretary know whether the casualties included tourists, as one might expect in the Tower of London, as well as local people'? Secondly, is the right hon. Gentleman convinced—and I do not expect a definitive answer now—that in view of the grave dangers to which the people of London and perhaps those visiting London are at present subjected, the security forces are of adequate strength, or might not consideration need to be given to bringing in reinforcements from provincial forces during the height of the tourist season?
On my own behalf, and on behalf of my constituents and those of other constituencies in the middle of London, I should like to express our deep sense of gratitude to the police, the security forces, the hospitals, ambulance services and everyone else who helped.

Mr. Jenkins: I note what the hon. Gentleman has said, and I am sure that the members of those services will also note it. I am glad the hon. Gentleman specifically mentioned my right hon. Friend the Member for Stepney and Poplar (Mr. Shore), in whose constituency the incident occurred. My right hon. Friend is sitting beside me, and would particularly have wished to use words of his own if he had been able to speak.
I understand that a number of tourists, including some from overseas, were, I regret to say, among those injured.
We shall give the fullest consideration to the security point, but I should not like to pretend that it is easy to provide absolute security in a wide range of buildings throughout London and in the country which are visited by large numbers of the public on a day-to-day basis.

Mr. William Molloy: I am sure that my right hon. Friend is aware of the feeling of utter revulsion and protest in the House against those filthy people who have perpetrated this abominable act, and that he will acknowledge that the calculated and filthy mind that has organised an amount of explosives and placed it in a public place to harm and destroy innocent people will gain no support from any part of the House or the British people, nor shall we be intimidated into giving support. Does not my right hon. Friend agree that the time has come when, strenuous though it may be, we must look at every public building in the land to defend ordinary people against the vulgar activities of those who are alleged to be human beings but can perpetrate such abominable acts on innocent folk?

Mr. Jenkins: We all agree with my hon. Friend's expressions of revulsion. I assure my hon. Friend and the House that we shall do everything we can to see that the best possible security measures are taken.

Sir Harmar Nicholls: The whole House will support the Home Secretary in his expressions of sympathy. We recognise his sincerity, as we do that of my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph). But the nation is becoming angry, and I believe that it will start to look for something more than words from Parliament.

It could well be that the nation will insist that Parliament insist that the slaughter of innocents which is going on so relentlessly should rank for the death penalty. No one would want to quarrel with those who have sincere convictions on the matter, but the nation could well demand the death penalty for such actions, and Parliament should prepare itself to meet that demand.

Mr. Jenkins: The hon. Gentleman is entitled to express his views. The House has considered these matters. What I think is more important is to try to prevent these incidents from happening, which we are all determined to do. I and my predecessor have made it clear that we shall take all measures that we think necessary and desirable to that effect. But I do not think that the House would wish to rush into an opinion, on a matter on which it has already reached a decision, at a moment of this sort, under the emotional shock of this horrible incident.

Mr. John Lee: Has my right hon. Friend any information to indicate who are the people behind this outrage? Presumably he will make another statement as soon as he has more information. Will my right hon. Friend take up with my right hon. Friend the Leader of the House the question of a debate on internal security? I believe that many hon. Members on both sides of the House now regard it as a matter of importance that it should take place before the House rises for the Summer Recess.

Mr. Jenkins: That is not a matter for me. I am not sure that we should necessarily solve the questions of security by debating them. However, I take note of what my hon. Friend says and if I have new information to give the House I shall, of course, endeavour to give it.

Mr. W. F. Deedes: In the emotions that are bound to be aroused by this event, will the right hon. Gentleman bear firmly in mind the point raised by my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), that on first reports the incident appears to be an attack of a new character, and that at this season and in such public places it carries grave implications which should receive immediate attention?

Mr. Jenkins: Yes, Sir. As I indicated I shall bear that fully in mind.

Mr. Patrick Cormack: The whole House will naturally respect the way in which the Home Secretary has made his statement and his answer to my hon. Friend the Member for Peterborough (Sir H. Nicholls). But as it is obvious that no motive anywhere at any time can conceivably justify this sort of outrage, will he give calm and careful reconsideration to all the penalties available for acts of terrorism and sabotage? I ask no more. I hope that the right hon. Gentleman will promise no less.

Mr. Jenkins: I do not think it right in making a statement within a few hours of an incident of this sort to make any policy statement or to give any indication of a policy statement about matters which require very mature consideration.

Mr. Walter Harrison (Treasurer to Her Majesty's Household): I beg to ask leave to withdraw the motion.

Motion, by leave, withdrawn.

FINANCE BILL

As amended in Committee and in the Standing Committee, again considered.

Question again proposed, That the amendment be made:—

7.32 p.m.

Mr. Pardoe: Following the sombre remarks of the Home Secretary we return to the debate on advance corporation tax. The House will be glad that the Chancellor of the Exchequer decided to come down to give us his views, albeit rather brief, on his present judgment of the economy. But it would have been much more helpful had we had some indication of the Chancellor's views on the economy generally before we started the Report stage. It is extremely difficult for us to conduct debates on important Budget concessions and on Finance Bill amendments without having any idea of how the Chancellor sees the direction and shape of the economy, while we are, nevertheless, under notice that the Chancellor intends some time during the next week to produce some sort of mini-Budget which might be reflationary, deflationary, neutral or whatever.
Therefore, we have been debating amendments yesterday and today in an unsatisfactory situation. Despite the Chancellor's good will today in coming among us I do not think that we are much wiser as to his views on the shape or the future of the economy. The Chancellor spoke about the necessity to maintain secrecy. We all understand that secrecy is necessary if specific changes are being made in rates of taxation, which may affect the Stock Exchange or other institutions, but surely we could have had a little more information from the Chancellor on his general judgment of the economy.
The amendment moved by the right hon. Member for Carshalton (Mr. Carr) also bears the names of myself and my right hon. and hon. Friends. It is an extremely important amendment which goes right to the root of the Chancellor's Budget judgment. I make no bones about that. I have never denied it. We voted against the Second Reading of the Finance Bill because we believed that the Chancellor had then got his Budget judgment wrong. No part of the Bill is more directly fathered by Budget judgment than the clause to which the amendment refers, because it could have sprung only from a belief that company liquidity was fine and could be squeezed without further harm to the economy.
Clause 12 imposes on companies liable to pay advance corporation tax an additional liability to make an additional payment equal to one-half of whatever advance corporation tax becomes due in the financial year 1974. I am not arguing here about the merits of advance corporation tax as such, although it might be that we should open that can of beans on another occasion if we are to avoid what I believe is likely, namely, a dangerous recession.
My concern with this additional impost for this year is that we have had no debate on the Question, "That the clause stand part of the Bill" during the Committee Stage. I fully expected a debate at that time. Before the Whitsun Recess it was more or less decided between the two Front Benches that there would be a debate. Indeed, there was a specific agreement that there would be a debate on the clause after the Whitsun Recess. The story is told in columns 331 and 332 of HANSARD of 21st May. But we


have had no such debate, presumably because the Front Benches, through the usual channels, had come to an agreement not to have one.
Therefore, it seemed to us that tabling the amendment would be a way of having a major debate on the whole question of this special impost on advance corporation tax. We have had no general defence from the Government—

Mr. Dell: As an historian who wishes to have accuracy I should say that on the day in question I came to the House expecting that there would be a debate and I was prepared, as far as I could, to answer it.

Mr. Pardoe: I can fully accept that the Government Front Bench was not in on the conspiracy. Nevertheless, whether there was or was not a conspiracy, by some extraordinary means a debate on the Question, "That the clause stand part of the Bill" was avoided, either conveniently or inconveniently. Therefore the House did not have a chance to consider the matter in great detail, although we have since debated some not insubstantial amendments.
It seemed to us right to have a debate on this occasion. We had no general defence from the Government on Second Reading regarding this special impost. In the debate on 9th May we simply had this statement from the Chancellor of the Exchequer:
It would have been totally wrong in my view if the corporate sector had not been asked to bear some part of the extra burden."—[OFFICIAL REPORT, 9th May 1974; Vol. 873, c. 618.]
That, I am sure, is a sentiment with which we can all agree, but it does not answer the important question raised by the right hon. Member for Carshalton, and which I hope we can also raise.
The Chancellor, on the Second Reading of the Finance Bill, gave no indication at all of his view of company liquidity. I warned on Second Reading that this was bound to have a considerable effect on employment and investment. The Chief Secretary, however, in a speech to a Financial Times conference on 24th April said:
Thus, far from being gloomy as some have suggested, the Budget offers better prospects for industry.

He went on:
I believe unnecessary alarm has been spread by the much exaggerated comment on the effects of the Budget on the liquidity positions. … Liquid assets of industrial and commercial companies late last year were at very high levels, around £10,000 million … but there is no evidence that so far companies generally are experiencing a liquidity crisis.
That was in the past, as are all statements on company profits with which hon. Gentlemen opposite make great play. We have to concern ourselves here with the company liquidity and profitability in the future, and the figure of £10,000 million, which the Chief Secretary mentioned in his speech and which has been bandied about a great deal in speeches on this subject, particularly by Government spokesmen, refers to the end of 1973.
Since then, we have had tough and strict price controls. There have been threshold agreements imposed, causing considerable problems for many companies—much greater problems than anyone expected when the Budget speech was made. There have also been higher national insurance contributions, higher prices in nationalised industries, higher corporation tax and advance corporation tax.
It is now clear that the Chancellor's Budget judgment was wrong. I thought so and said so at the time. It took a wrong view of the effect of the three-day week, as the Chancellor has already admitted, and that was easily done and was totally excusable. What was far less excusable was the Chancellor's wrong judgment on the consequences of the deflationary effect of oil price increases and the turn round in the public sector deficit. I said on Second Reading that together these amounted to a total turn round in the public sector deficit of £4,000 million, which is a fairly colossal figure. The Chancellor's judgment on this proposal was warped by other than strictly economic matters.

Mr. Norman Lamont: Would the hon. Member not agree that the £10,000 million the Chief Secretary quoted was an important figure in that it is a gross figure and excludes bank borrowing? If we are to have any realistic assessment of company liquidity we ought to take into account bank borrowings. Although the Chancellor may


argue that such borrowings will not be called in immediately, it is highly unlikely that at the present high rates of interest anyone will be able to finance investment or to maintain employment and production in this way.

Mr. Pardoe: The hon. Gentleman is absolutely correct. The £10,000 million was wrong for a multitude of reasons, not the least being those which he has stated.

Mr. Tom Boardman: Does the hon. Member also agree that the total figure of bank borrowing was £14,000 million and that therefore there was a negative liquidity of £4,000 million?

Mr. Pardoe: That is also true. The Chancellor's judgment was probably warped by other than strictly economic matters. The Government were being pressed during the election campaign and shortly after it by the TUC and their Left wing to grab from the company sector some of what was called "the company fat".
There were possibly even worse motives. The long-term strategy of the Government is for far-reaching nationalisation of industry and the extension of Government control through increased dependence on Government finance. For that strategy to be effective companies will have to be far less self-sufficient for investment finance, forcing them—and I think this is what the Government intended—to look to the Government and the banks for their funds. As the company sector moved into deficit and became more dependent on the banking system it would provide a golden opportunity for a major extension of Government control of industry through the nationalisation of the banking system.
This may be taking a rather Machiavellian view of Government policy but there are plenty of Machiavelli's on the Front Bench, not necessarily present now. What is the economic deal now? Even if we allow runaway wage inflation—and we may well allow for that—sustaining consumer spending later in the year, the impact of the Budget measures on the company sector financial position resulting in a £2,000 million to £3,000 million deficit at least was always bound to lead to a collapse in investment spending, widespread bankruptcies and rising un-

employment by late autumn or early 1975.
Do the Government accept this? Is that their new judgment, if not their old one? Do they believe that this is the way to deal with inflation in the absence of an incomes policy? The present wage explosion—and we must remember that wage increases are running ahead of price increases and a new norm of 20 to 25 per cent. is being set—is running away with the economy and the Government have no effective policy to combat it. A large part of the burden of later price increases will be shifted through this on to the company sector. That may mean that there is no real need to stimulate consumer spending at present.
The Government may well ask, what about priorities? It is true that this amendment is expensive—it would cost £300 million. This is an alternative to increased unemployment pay. If something is not done for the company sector very quickly there will be 800,000 people out of work by the end of the year or early next year. The increase in unemployment pay will be enormous.
Frankly I would rather put £300 million into companies to maintain employment and produce something than pay people to produce nothing. On that point alone priorities could come down fairly heavily in favour of improving company liquidity. I hope, therefore, that the Minister will be able to say that the Government are sympathetic to the idea, that they recognise the serious problems that now exist in the company sector and perhaps are even prepared to admit that they got their judgment wrong—I hope for good reasons rather than bad reasons—as I said at the time of the Budget debate.

7.45 p.m.

Mr. Dick Taverne: May I say how much I welcomed the remarks at the end of the speech by the right hon. Member for Carshalton (Mr. Carr). He seemed this afternoon to be drawing back from the brink over which he plunged rather recklessly on two occasions yesterday. There are completely different problems about a Finance Bill when there is a minority Government. Last night I accused the Opposition of behaving with a lack of responsibility when they had the power to write their own Finance


Bill. It is a somewhat heady power and a most unusual situation.
At this stage of the Bill individual clauses are considered separately and there is always, or so it seems, an irresistible case to be made for cutting tax. The hon. Member for Worthing (Mr. Higgins) knows how Treasury Ministers time after time have to resist apparently worthwhile amendments to protect the Revenue. It is easy for all parts of the House, if they are free to do so, free from the control of the Whips, to back those cuts.
I was once told the story of an American senator who was asked how he had managed to retain his seat for about 40 years. He replied "By voting for every single demand for an increase in public spending and by voting against every single demand for increased taxation". It is a temptation which exists. On this occasion the right hon. Member and the hon. Member for Cornwall, North (Mr. Pardoe) have resisted it. They have put forward a case which I hope will be answered in some detail.
It is a matter of priority for the Government to decide. There are alternatives which they will have to consider. This may well be one of those which they have in mind for the statement which is to come. I am sure that if this is the spirit of the Report stage it will evoke a suitable response.
If there is a minority Government, which is not necessarily a situation to be deplored by everyone in this House and which seems to be a situation the public do not necessarily dislike, it places certain obligations and burdens on the Opposition. It forces a particular form of restraint, and yesterday was not an example of how that restraint should be exercised.

Mr. Peter Rees: To take up the point raised by the hon. and learned Member for Lincoln (Mr. Taverne), may I say that even with his able support the Conservative Opposition would not be able to carry any amendments which found favour with us. It needs the combined wisdom of at least, dare I say it, the Liberal benches and ourselves to carry any amendments. If there is any question of plunging over preci

pices of irresponsibility, the blame can hardly rest with any one party.
I am moved to intervene not by the speech of the hon. and learned Member, which was graceful and brief, but by the speech of the Chancellor. I was moved first by his figures and secondly by his discourtesy. Let me deal with the figures to begin with, although they have been ably and adequately dealt with by my right hon. Friend the Member for Carshalton (Mr. Carr). I remind the House, as I did yesterday, that as regards the amendment to Clause 5, in which I played some small part in Committee, I asked Treasury Ministers what would be the cost of incorporating such an amendment in the Bill.
I was told categorically on 17th June that it was impossible to calculate the figure. Last night the Chancellor came to the House and in a characteristically discourteous intervention and with a wealth of misleading detail calculated that the cost was somewhere between £100 million and £120 million. I forget what the figure was, and I attach no significance to it whatever. If the Chancellor approaches these problems in the same spirit of levity and discourtesy, the rest of his figures will naturally be treated with the same suspicion and doubt.
Another point in the right hon. Gentleman's intervention this afternoon deserves to be taken up. He told us that he had not yet made up his mind whether in fact any appeal was to be proceeded with by Customs and Excise before the London Value Added Tax Tribunal in the case of Thorn Electrical Industries Ltd. Our debates both in the House and in Standing Committee have proceeded on the basis that an appeal was likely. The Chancellor of the Exchequer and the Financial Secretary owe it to the House and to those outside who are interested in this important matter of VAT law to tell us whether Customs and Excise will proceed with the appeal. It is intolerable that we should be left in a state of uncertainty, particularly when our debates have proceeded on a certain basis.
If the Treasury Bench is not confident about the possibility of an appeal, why did it put out the most misleading, not to say disingenuous, circular which I ventured to quote last night dealing with the decision of the tribunal? I refer to


the circular from memory because I was not forewarned that the Chancellor would take this incredible line. The circular suggested that the matter created uncertainty and that the Government's amendment was designed to confirm the law as it was always understood. That, I believe, was an improper way for a responsible Minister to approach this problem. I am bound to say—I very much regret having to say it in his absence—that it is characteristic of the way the Chancellor has treated the House in our debates.
Comparatively speaking I am a recent arrival in the House, but I consider that it was discourteous of the Chancellor to intervene last night not having heard the earlier part of the debate and not to deal with all the specific questions that were put to him, and then to leave the House in a state of uncertainty. He has repeated that discourtesy this afternoon. He entered the Chamber having barely listened to any of the speeches. He made a somewhat similar intervention and departed before the debate on the amendment had been concluded. That is no way to treat the House. If we are to regard what he says with any seriousness, he owes it to the House to sit through our debates and to listen to what we have to say as, unfortunately, we have to listen to what he says.
The burden of the right hon. Gentleman's theme both last night and this evening is that we may not pre-empt his second Budget judgment which will be unveiled to us next week. If he has not the courtesy to give us a glimpse of what is in his mind, he has no right to criticise our amendments. In the uncertainty which he has created by announcing that his first Budget judgment in April is now out of date, how can we possibly form a concluded view on the amendment? He owes it to the House to have indicated before Report his preliminary views on these matters. We do not ask him to do so in precise terms. If he is to introduce a reflationary mini-Budget next week, he has no right to ask us to debate the amendment in a vacuum. If he is to leave us in a vacuum, we are entitled to form our own judgment, and no doubt we shall do so.
The argument that the right hon. Gentleman has advanced is that we are in a sense pre-empting what he is to un

veil next week. As a result of the lack of courtesy that he has shown us, I think it is much better that we should pre-empt his judgment. It is much better that we should introduce for him the reflationary package which otherwise he might introduce next week.
We on this side of the House, and I include not only my right hon. and hon. Friends but Liberal hon. Members—I hope that the hon. Member for Cornwall, North (Mr. Pardoe) will allow me to include him in my remarks—have shown a clearer appreciation of where the interests of the country lie. If the Chancellor is to come into the Chamber next week with the story that he will reflate demand by £500 million, all I can say to him is that I would much prefer to press this amendment to a Division. If there is to be any reflation—and this is a matter of fine debate as we have no guidance from the right hon. Gentleman—it should be in the corporate sector.
On the basis of the right hon. Gentleman's totally misleading figures and his arrogant behaviour, I believe that we must do the best we can in his absence. I hope that my right hon. and hon. Friends will take a more robust view about the amendment than they might have done if the Chancellor had adopted a more responsible approach to our debates.

Mr. Michael Shaw: As the hon. Member for Cornwall, North (Mr. Pardoe) has said, this is an important amendment. It concerns a matter that goes to the very heart of the Budget judgment. The fact is that this is not a Conservative but a Socialist Budget. The fact is equally true that in the amendment a lot of money is at stake. I believe that we are not free to take a clause such as Clause 12 as it now is and to deal with it in isolation when the sums are as vast as those involved in the amendment.
The country has just gone through a three-day working week. At that time the costs of goods and services were rising rapidly, possibly more rapidly than ever before. Companies were making record profits and yet at the end of the year they found that their liquid positions were worse than at the beginning of the year. There were record profits but they did not cover the requirements for increased costs in keeping the same


level of stocks that were maintained a year before. The conditions that companies have faced, although they have been clouded because of the monetary lull in their cash demand and a consequent easement of their position, have not been helpful and there are serious difficulties in many cases.
Any easement in the cash situation at the time of the original Budget decision was only temporary. I believe that the Budget decision should have been not to impose any further burden on companies but to continue to encourage them to go on producing and investing so that the future of our trading position could have been more secure. Having expressed that view—I believe it is a view which is held unanimously by my right hon. and hon. Friends—we must consider the Bill as it now is and consider the cost of the amendment.
Great though my sympathy is for the views expressed by my hon. and learned Friend the Member for Dover and Deal (Mr. Rees), I am bound to say that I do not take quite the same robust view of this matter as he does. From what I have heard so far, I would not be prepared to go into the Lobby to support the amendment.
How much better it would have been had the statement and the two-day debate on financial affairs which I understand we are to have next week had occurred before the Report stage of the Bill. We could then have discussed the amendments in the full knowledge of the Chancellor's views.
For those reasons I am reluctant to support the amendment in the Division Lobby, although I approve of the principles behind it.

8.0 p.m.

Mr. Nott: I hope that the House will forgive me if I rise only to indulge in a two-minute dialogue with my hon. and learned Friend the Member for Dover and Deal (Mr. Rees).
The right hon. Gentleman the Chancellor is obviously an extremely busy man. I do not think that he should attend in Committee or on Report, but when he comes to the House to speak on a specific matter he should do his utmost to see that debate through. When my right hon. Friend the Member for

Altrincham and Sale (Mr. Barber) came to the House to participate in a debate he stayed throughout. It is not good enough for the right hon. Gentleman to come into the House and, not having heard a word of the debate, make a speech and two minutes later go out again. I could not be more aware of the pressures on the Chancellor's time, but if he comes to the House at all he should stay for the debate.
I come to my hon. and learned Friend the Member for Dover and Deal and his robust philosophy. I agree with the remarks made by the hon. and learned Member for Lincoln (Mr. Taverne). We have to rethink the way in which we handle the Finance Bill if we again have a minority Government—which I hope will not happen, but that possibility is with us. The country cannot be run properly by 635 Chancellors of the Exchequer. The nation should not be placed in the position in which the House of Commons is effectively dictating the Chancellor's Budget strategy and, moreover, as the hon. and learned Member for Lincoln said, at a late stage in the proceedings.
It is the traditional function of the House of Commons to control Supply, but historically it would have seemed odd if those who were attempting to control the expenditure of the Sovereign had tried to shovel it down his throat. That is what, in effect, we have been attempting to do in the last two days.
I do not agree with what my hon. and learned Friend the Member for Deal and Dover said about the VAT amendment. I understand the retrospective argument, but I do not think that it was, in practical terms, retrospective. We have to rethink the way in which we go through the Lobbies and add £120 million to the borrowing requirement either this year or next year. In a minority situation we cannot afford to do that too frequently. Fortunately, there is a way of avoiding the problem for this year by taking the matter further before the courts. I listened to the debate yesterday, but I do not agree with the conclusions or the vote that were reached.
I come to corporation tax. I agree with my hon. Friend the Member for Scarborough (Mr. Shaw). I do not think that we should press the amendment.


What is important to me is what we should be doing about the size of the borrowing requirement and the rate of increase of the money supply. Both these issues we shall debate next week and before we do so I should like to give the matter more thought.
But my immediate reaction is that the money supply is growing at much too slow a pace. I agree with the general point made by the hon. Member for Cornwall, North (Mr. Pardoe), if I understand him correctly. I do not know whether M3 or M1 are meaningful figures. Theorising on the money supply sometimes reaches preposterous proportions. The greatest experts on money supply would admit how little they know about it. In the conditions which the Western world will face over the next two or three years it cannot be right that M3. if it means anything at all, should grow at a rate between 5 per cent. and 8 per cent. That is a recipe for disaster in 1975 and 1976.
Some of my hon. Friends say to me that if we increase the money supply at this moment we shall enhance inflation. I find that a strange argument because it completely disregards the time lags in monetary policy. We should be thinking about what the situation will be in 1976 if we go on expanding money supply at 15 points less than the current growth of money GNP. Money GNP is now growing at between 20 per cent. and 25 per cent., whereas money supply is growing at 5 per cent. That must be a recipe for disaster in 1975 and 1976. It will greatly exaggerate the size of the unemployment in those years which will be high in any event.
My right hon. Friend the Member for Carshalton (Mr. Carr) made an excellent speech, and I am glad that he said we should listen to the debate and to what the Chancellor had to say before making up our minds whether to vote on the amendment. I am more of an agnostic on whether we should vote on this amendment than I was on the VAT amendment last night. Believing as I do that it is becoming urgently necessary to expand M3 I am in a quandary exactly how we should do it. I strongly believe that we should get back to a balanced Budget, but how we are to do that in the next three years in the conditions

which we are likely to face is a great problem.
On the whole, I think that we should expand bank advances in the private sector and run down the Budget deficit. We must keep the Budget deficit as low as we possibly can and try to bring the Government accounts more into balance. We should probably release special deposits and some pressures now on the banks in the private sector. We should try to ease the money supply in that area. If I am lucky enough to be called to speak next week in the economic debate I should like to develop that theme.
For reasons which my hon. Friend the Member for Scarborough advanced I hope that we shall not press the amendment, although it has provided the opportunity for an interesting debate.

Mr. Dell: This has been an interesting debate. It would appear from the way that the argument went that the Opposition were gradually convincing themselves that they should not vote on the amendment, regardless of my reply. The right hon. Member for Carshalton (Mr. Carr) said how important my reply would be, but I noticed the way in which the argument changed after his speech. Nevertheless, I must treat the debate seriously.
Neither I nor my right hon. Friend have ever tried to under-estimate the problems involved in our present situation. Many companies face serious problems, there are problems for the Government and problems with the public sector borrowing requirement.
It is interesting that in a debate which is closely related to the public sector borrowing requirement and in which we are discussing an amendment which if passed would increase the public sector borrowing requirement by £300 million the one fact which has not been mentioned by any right hon. or hon. Gentleman on the Opposition benches is the borrowing requirement in the last year of the previous Government, before we came into office. I was interested to hear the hon. Member for St. Ives (Mr. Nott) express the wish that we should get back to a balanced Budget. I do not think he can claim that his right hon. Friend the former Chancellor of the Exchequer advanced the cause of getting back to a balanced Budget. This is the problem which we faced when we came into office.


We wished to do something about the public sector borrowing requirement as we found it when we came in.
I accept the fact, since it is obvious, that the mini-budget casts its shadow forward. The hon. and learned Member for Dover and Deal (Mr. Rees) said that we were debating the matter in a vacuum. I fear that I cannot fill the vacuum this evening. I cannot imagine any mini-budget which, introduced by my right hon. Friend next week, would affect the need to reduce the borrowing requirement this year by the £300 million which the ACT surcharge enables us to do. Whatever else happens, it will still be essential if we are to keep the borrowing requirement in any sort of control.
The right hon. Member for Carshalton was concerned with the effect on investment of taking money away from the company sector. He argued about the need to encourage high quality investment, and went on frankly to admit that no Government had been particularly successful in encouraging high quality investment and said that our investment record was poor by international standards among developed countries. But he said that by the time we wanted a fertiliser, we sucked money out of the economy. I do not believe that the ACT surcharge will have the effect on investment that the right hon. Gentleman expects. I wish to emphasise that the continuing and determining fact about the level of investment is the availability of profitable demand. That is the reason why we can have some hope, in the current export demand, that we might attract a level of export-oriented investment which would move in the direction of changing the balance of activity.
When we came in we did not tinker with the investment incentives. We left the 100 per cent. depreciation, which is a valuable incentive since it has an influence on investment, but the main factor in determining the level of investment is the availability of demand—and in the present highly competitive situation the availability of rising export demand should be a favourable factor.
The qualification which the right hon. Gentleman would make relates to the present state of company liquidity. There may be demand, but is there the money to

finance the investment? The hon. Member for Cornwall, North (Mr. Pardoe) discussed the question of the current level of company liquidity and we had an intervention from the hon. Member for Kingston-upon-Thames (Mr. Lamont) on this point. At the end of the first quarter of 1974, after the three-day week, the level of company liquidity gross was still high. It was still at that time around £9,900 million.
I know the Conservatives tend to qualify the figure by referring to the net position. They say that if one takes away bank advances there was a net deficit and that the figure of £9,900 million is not to be taken at face value. I do not believe that is the correct interpretation of this situation. These bank advances in theory may be on call, but they are not so in practice. This company liquidity is available to finance investment. The CBI, for example, is not claiming any immediate problems. It says that there may be problems next year, but in its representation to the Government the CBI has not claimed any immediate liquidity problem.
We have helped liquidity by keeping regional employment premium in existence and giving assurances about its future. That should help, but we shall keep company liquidity under review—an assurance which we have repeatedly given since the time of the Budget.
8.15 p.m.
The hon. Member for Cornwall, North discussed the financial deficit in the company sector and speculated on the ill effects which the present deficit might have. Unfortunately, in the present situation, with a large balance of payments deficit, that was inevitable. What does the hon. Gentleman expect to be done at this moment? There are the public sector, the corporate sector and the personal sector, and it is inevitable that in total they should be in deficit.
In the personal sector, is the hon. Gentleman suggesting that we should have further increases in taxation to reduce the surplus in that sector? If not, the question is simply a matter of striking the right balance between the deficit in the public sector and that in the corporate sector. That has to be determined by the Government. We believe that, given the conditions which we were facing at the


time of the Budget, my right hon. Friend made the right decision by imposing a £300 million ACT surcharge as a way of producing the right balance between the deficit in the public sector and that in the company sector. The question is whether this will so affect the company sector that it will have an ill effect on investment. I have given reasons why I do not believe it should have that effect.

Mr. Maurice Macmillan: Since the right hon. Gentleman is dealing with investment will he explain, on the question of exports—and I have experience of a firm three-quarters of whose products are exported—what he means by the availability of export demand?

Mr. Dell: There is at present considerable demand overseas for the products of British industry, with the result that British industry is increasing its exports. It is helping us to deal with the non-oil deficit, which, fortunately, is falling. That is what I meant by saying that there is demand. We know that there are fears about the rate at which world trade may expand in the future, but at present we are seeing in our exports an increase which is of great value in helping with our balance of payments problem and is reducing our non-oil deficit.
A further point on the availability of money to companies to finance their activities is the situation in regard to bank lending. There continue to be large, un-drawn facilities and, so far as we know, no exceptional calls are being made on bank facilities at the moment. These are average statements. They may be misleading in respect of particular companies, but we have asked the banks to look at the problems of particular companies.
The right hon. Gentleman put the problem on the basis, "Should we take £300 million this year at the expense of next year?" We believe that, given the current liquidity position in the company sector, we can justifiably take the £300 million this year without doing any harm to the company sector, and we have decided to do so this year. I hope that he will accept, on looking at the facts and figures, that that was not an unreasonable decision.
The hon. Member for Cornwall, North has a very much more Machiavellian interpretation of our actions. He believes

that we are sucking the company sector dry to make it ripe for nationalisation. If he believes that, he will believe anything. There is no truth in it. We have to ensure success for the private sector of the economy if we are to have success for the Government and for the country. There is no question about that. Even to imagine that to be the policy of this Government is an absurdity.
I hope that now that the right hon. Member for Carshalton has heard my explanation he will join some of his backbench colleagues in agreeing that he should not recommend his right hon. and hon. Friends to vote in favour of this amendment. This was a decision reasonably taken to help with a public sector borrowing requirement which we inherited. I am sure that the clause will be necessary, whatever my right hon. Friend the Chancellor of the Exchequer rises to say next week.

Mr. Maurice Macmillan: Will the right hon. Gentleman say a little more about the availability of export demand? He explained why liquidity and cash problems and this extra advance on corporation tax were not affecting company investment. One reason that he gave was that export demand was available. He used that phrase as if it was just sitting there, waiting for someone to get it. However, those of us who export find that we have to invest first in order to be able to be certain of meeting any demand that our efforts create. It is this prior investment which concerns us, and it is this factor which the right hon. Gentleman's explanation, admirable though it may have been in other directions, seemed to neglect.

Mr. Dell: I am glad to hear that the right hon. Gentleman's company exports three-quarters of its turnover. I wish that more companies could make that claim. He is obviously being of great assistance in his new capacity on the Opposition back benches in helping to deal with the country's balance of payments deficit.
In another capacity in an earlier epoch I, too, was deeply concerned with exports. I spent a large part of my life in exports. The right hon. Gentleman does not need to tell me that it is essential to invest first, and that it has to be profitable in order for it to be encouraging to do. The fact is that here is a world market


which we can supply, which we are able to supply the more easily because our products are competitive, and which industry is more ready to supply because it can make profits uncontrolled by Governments if it chooses to supply.

Mr. R. Carr: If I may exercise my right to reply to the debate, I do so with the assurance that I shall not detain the House for very long.
Before addressing myself to the substance of the amendment, perhaps I might say a few more words about the VAT amendment. This is an important matter.
If we had had any reason, even now, to believe from anything said to us by the Government, not only on Report but in Committee, that £120 million was in volved in this year, that is a matter to which we would have addressed ourselves. However, we would still have had to face what I described last night as a very awkward decision. We would have had to decide between a strong call for expediency—using that word in no derogatory sense—and a matter involving constitutional and legal principles.
If the right hon. Gentleman reads all that was said by his fellow Treasury Ministers, he will see there was no reason for us or for anyone outside this House to imagine—until late yesterday—that the amount was as big as he now says it is and that it could possibly come into circulation in the current year.
One of the reasons argued by the Financial Secretary against our amendment and in favour of the House passing retrospective legislation on this matter was that the period for settling it all up would be enormously protracted. If the Government wish to have any give and take of responsibility in these important matters, they must accent that we have no evidence before us leading us to believe that the issue at stake involves £120 million on this year's public sector borrowing requirement, or anything like that sum.
If the Paymaster-General reads all that has been said by his right hon. and hon. Friends in dealing with this matter, he will agree that were he on the Opposition benches he could not possibly be expected to take that view. I still do not take the view that there is this amount at stake this year.
I would have been shocked if I had felt that the Customs and Excise did not intend to pursue this appeal. I am not a lawyer and therefore I am not versed in the nuances of what particular phrases mean. I was under the impression from what was said by the Financial Secretary on 17th June, in Committee, that he was of the view that the Customs and Excise still believed that its interpretation of the law was right, that what the House intended was what the Act achieved, and that the tribunal in this case had perhaps made a rather strange judgment. I was under the impression that notice of appeal had been given, and given in a meaningful sense, and that it would be carried through.
Given that that was our feeling from reading the Act and studying the case, if that amount is at stake it will need a great amount of justification not to proceed with the appeal. I accept that the Chancellor of the Exchequer has a responsibility and a freedom of action in this matter. But I hope that he will accept that we had no evidence to suggest that there was anything like £120 million at stake in this year's public sector borrowing requirement.
Turning to the amendment, I should like to repeat our strong belief that the future protection of jobs in this country, as well as our capacity to compete on an equal basis and maintain a high standard of living with full employment, depends critically now and in the years ahead on stimulating a higher level of productive investment in our industrial economy. That being so, we give this matter a high degree of priority and we believe that it is vital for the Government to encourage the fulfilment of that high priority need.
The Paymaster-General advised the House that this was not the way to do it. I will not again join argument whether it is or is not. I accept that, as a matter of responsible judgment, the right hon. Gentleman believes that this is not the way to do it. However, he did not indicate in what other way it might be done. I suppose that to some extent he says that he cannot anticipate his right hon. Friend's Budget statement next week. That underlines the unsatisfactory nature of the position in which we find ourselves. We are put in a very difficult position.
We are asked to conclude our proceedings on the basis that it would perhaps be improper to make such a big adjustment in the Chancellor's overall Budget judgment and balance in the knowledge that in a few days he will almost certainly tell us that that judgment and balance, if not wrong at the time, are at least outdated. Therefore, we must make up our minds once and for all on this matter before we have any idea of what the new balance will be.
8.30 p.m.
I advise my right hon. and hon. Friends that for the Opposition to press an amendment involving a flow of £300 million would, in effect, be taking over the job of the Government. This is a single item of such massiveness that I do not think we could or should do it. That has been my feeling all along.
Like the hon. Member for Cornwall, North (Mr. Pardoe), I have felt that this was an important matter and that to bring it forward as an amendment at this stage provided us with the opportunity of a minor economic debate of an important nature which, for reasons that I cannot now remember—certainly not the kind of conspiracy that the hon. Member for Cornwall, North suspected—we were prevented from having in Committee on the Floor of the House. That is why the amendment has been useful. However, I advise my right hon. and hon. Friends not to press it. Of course, we would take it ill if, having advised us in this sense today, the Chancellor were to do next week what he has been advising against today.
I repeat the warning that we shall take it ill, in the sense that we shall regard it as critically bad judgment for the future welfare of this country, if next week the Chancellor does not include in his measures, if he proposes reflationary measures of any kind, some important initiative to help industry and to encourage a higher level of investment.
On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Joel Barnett: I beg to move Amendment No. 5, in page 6, line 42, at end insert
'but nothing in this section shall require such a payment to be made by the trustees of an authorised unit trust or by an investment trust

(within the meaning of Chapter VI of Part XII of the Taxes Act);

Mr. Deputy Speaker(Mr Oscar Murton): With this amendment I think it might be convenient to take Government Amendments Nos. 6, 7, 8 and 9.

Mr. Barnett: Amendment No. 5 meets a specific representation made in Committee on the effect of Clause 12. It releases authorised unit trusts and approved investment trusts from the operation of the clause.
We believe that the trusts are in a special situation. For tax purposes authorised unit trusts are treated as distributing all of their available income and approved investment trusts are required to distribute at least 85 per cent. of their income. This means that the trusts may have to distribute income received under deduction of income tax. If they do, they are not able, because of the mechanics of the tax system, to set this income tax suffered by deduction against their liability for ACT or for the ACT supplement. Thus, the supplement would bear with particular severity on the cash position of unit trusts and, only to a slightly lesser extent, investment trusts.
Amendments Nos. 6 and 7 provide that in a group of companies the parent may claim to have the ACT supplement paid by it set against a subsidiary's corporation tax liability for the relevant accounting period. Again, these amendments implement an undertaking that I gave in Committee.
The next two amendments, Nos. 8 and 9, accelerate the return of the ACT supplement to the company which can show that the amount paid would exceed its mainstream liability for the relevant accounting period. Under the clause as drafted a company has to wait for the repayment of any excess over its liability for the relevant accounting period until the date when that liability falls due or would, if there had been any, have fallen due, which is normally 1st January 1976.
It has been argued by, among others, the CBI and in Committee by the hon. Member for Croydon, South (Mr. Clark), and I am sure by the hon. and learned Member for Dover and Deal (Mr. Rees), that this hits hard at the company which, because of double tax relief or large tax allowances on capital expenditure, has


little or no ultimate corporation tax liability. The effect of the proposed amendments is that the repayment may be made at a date earlier than the date laid down in Clause 12(6) if, and to the extent that, the inspector is satisfied that the supplement exceeds the mainstream liability.
In order to prevent too early a loss of funds to the Exchequer no repayment under this concession is to be made before 1st September 1975. I hope that the House will accept this. I trust those hon. Gentlemen to whom I gave those undertakings in Committee will appreciate that I have fulfilled my undertakings.

Mr. David Howell: The Chief Secretary pressed the three points here covered by the four amendments with great vigour during the earlier part of the Committee stage. We welcome the three concessions which have now been brought forward, the lower rate of ACT for unit and approved investment trusts, the point concerning the parent company, and the pay-back point coverered by the last two amendments.
I do not know whether my hon. Friends will have any further comments. We welcome these concessions.

Mr. Peter Rees: I acknowledge that most of these amendments were made in response to various points raised in Committee by my hon. and right hon. Friends and myself.
I am a little worried about Amendment No. 9. I would ask the Chief Secretary about the standard of satisfaction the inspector will require. Without wishing to appear churlish and looking the gift horse in the mouth, I am worried about the date of 1st September 1975. Presumably if the company concerned has an accounting period concluded before that date it will not preclude a repayment of advance corporation tax. It may be that the Chief Secretary will be able to reassure the House that, in those circumstances, repayment will be possible before September 1975, otherwise it appears hard and ungenerous. Perhaps the Chief Secretary could give an assurance concerning that amendment.

Mr. Joel Barnett: I should have thought that the standards that an inspector of taxes would require are the normal stan-

dards required when he agrees a set of accounts. Once he has agreed accounts and the loss created, whether by losses as such or by capital allowances, that will be sufficient for him.

Mr. Rees: If that is so, the amendment gives nothing. If the accounts and the company's liability have been agreed—or the fact that it was in a loss position and not obliged to pay corporation tax—surely it would in any event be entitled to repayment of ACT.

Mr. Barnett: I am sure that the hon. and learned Gentleman appreciates that a company can make losses yet still be liable to advance corporation tax because it had paid a dividend.

Mr. Rees: indicated assent.

Mr. Barnett: I see that I carry him with me.
The reason for the amendment is that, as originally drafted, the clause would have meant that it would have taken somewhat longer to make the repayment.

Mr. Rees: indicated assent.

Mr. Barnett: I see that he takes my point.
I understand the hon. and learned Gentleman's concern about the need for making the repayment earlier than 1st September 1975, but the ACT supplement is intended to reduce the public sector borrowing requirement and too early a date for repayment could go some way to frustrating that intention. The amendment would avoid the situation put to me in Committee, in which, if the supplement had been paid, a repayment would be unduly delayed. I hope that it will be considered that I have gone some way to meet the point made in Committee.

Amendment agreed to.

Amendments made: No. 6, in page 6, line 44, after 'shall', insert 'subject to subsection (2A) below'.

No. 7, in page 7, line 3, at end insert:
'(2A) Where throughout the relevant accounting period of a company which makes a payment under this section (in this subsection referred to as "the parent company") another company is a subsidiary of the parent company for the purposes of section 92 of the Finance Act 1972, the parent company may by notice in writing to the inspector elect that, to the


extent only of the subsidiary's liability to corporation tax for the subsidiary's relevant accounting period, or to such less extent as may be specified in the notice, the payment shall be deemed to be made on account of that liability.'

No. 8, in page 7, line 26, after 'above'. insert 'or subsection (6A) below'.

No. 9, in page 7, line 30, at end insert:
'(6A) If the inspector is satisfied before the time mentioned in subsection (6) above that an amount falls to be repaid under that subsection, that amount shall be repaid when the inspector is so satisfied; but no repayment shall be made by virtue of this subsection before 1st September 1975'.—[Mr. Joel Barnett.]

Mr. Peter Rees: I beg to move Amendment No. 180, in page 8, line 10, after 'up' insert:
'or where a company ceases to be within the charge to corporation tax'.

Mr. Deputy Speaker: It will be convenient to discuss at the same time the following amendments:

No. 181, in page 8, line 11, after 'commenced', insert:
'or if the company ceased to be within the charge to corporation tax'.

No. 182, in page 8, line 14, after 'commenced', insert:
'or if the company ceased to be within the charge to corporation tax'.

No. 183, in page 8, line 18, after 'winding-up', insert:
'or the accounting period at the termination of which the company ceased to be within the charge to corporation tax as the case may be'.

Mr. Rees: The amendments are designed to increase the relief already afforded by subsection (8). As the scheme of Clause 12 has been explained, the additional charge of advance corporation tax is a "loan" to the Government to be repaid from the liability to corporation tax of a company that has paid a dividend. As the Chief Secretary has recognised in subsection (8), there may be situations in which a company, although it has paid a dividend, will have no subsequent liability to corporation tax. Therefore, it will never get any repayment of its loan to the Government. I may be wrong on this, and I am open to correction.
The Chief Secretary has recognised that particular hardship could arise when a company was in the process of being wound up before 1st January or at the beginning of this year. However, a further situation has occurred to me and

I hope that there is some validity in the point. A company may have ceased to trade and therefore will not have a subsequent accounting period for liability to corporation tax against which the additional charge can be set. In other words, it is only another example of a company not being able to achieve a repayment of its loan to the Government. The amendments are designed to deal with that situation and I hope that they will not provoke such a wide-ranging debate as we had earlier tonight.

8.45 p.m.

Mr. Joel Barnett: I am happy to respond to the hon. and learned Gentleman. I appreciate the point that he is making. There is a possibility that there may be a type of company caught in the way that he suggested. But I want to explain the effect that his amendments would have.
The amendments are designed to put the company which ceases to be within the charge to corporation tax on a par with a company which is wound up, both as regards the liability to pay the ACT supplement and the set-off or repayment of the supplement. We have not been able to see clearly the type of case which these amendments seek to protect. But in any event—I hesitate to say this to the hon. and learned Gentleman, although I see him smiling—the amendments are, in the jargon, technically defective, I hasten to add that I do not accuse the hon. and learned Gentleman of being defective in any way.
I am assured that the amendments as drafted would embrace a company that at any time in the past had ceased to be within the charge to corporation tax—for example, through migration—irrespective of whether it had subsequently come back within the charge. The purpose of subsection (8) is to exempt from the surcharge the exceptional case of the company already in liquidation on 1st January 1974 which makes a distribution after that date giving rise to an ACT liability. Under paragraph (b), where a company goes into liquidation after 1st January 1974 but before 1st April 1975, any additional payments made under the clause may be rebated against the tax due on profits, if any, arising up to the date that winding-up commenced. This ensures that the completion of a winding-up will


not be unduly delayed because of the effect of the clause.
We find it hard to envisage a case in which it is thought that the subsection operates unfairly. There is no problem with the example that the hon. and learned Gentleman has given, because it would be treated in another way and I am assured that it would be all right.
However, I want to promise this to the hon. and learned Gentleman: if we come across cases—examples which he has not given us—which might be affected in the way suggested. we shall seek either to deal with them by administrative action, or, if necessary, come back with other amendments. At present, as far as I can see, there is none that would be affected—I hope that the hon. and learned Gentleman will accept that from me—otherwise I should have been happy to look at this matter.

Mr. Rees: I am touched by the Chief Secretary's diffidence in suggesting that my amendment might be technically defective. These were suggestions that he made at various intervals in Committee, and I am well inured to this kind of criticism—although I did not expect it on this occasion.
However, I do not wish to detain the House. The hon. Gentleman has made a generous concession which I am sure will meet the justice of this case. Although I am not happy about administrative concessions, I agree that this is such a small and narrow point that it may be appropriate to deal with it by the Chief Secretary at a later stage proposing—not on his Finance Bill—a more far-reaching amendment.
On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 13

ALTERATION OF PERSONAL RELIEFS

Mr. Higgins: I beg to move Amendment No. 109, in page 8, line 35, at end insert—
'(c) provided that if a married claimant proves that at any time within the year of assessment he or his wife living with him reaches the age of 65 years or upwards for the figure of £865 shall be substituted the figure

£975 and it a single claimant proves that at any time within the year of assessment he reaches the age of 65 years or upwards for the figure of £625 shall he substituted the figure £680'.
I should mention that in the amendment as originally printed the figure £875 appeared instead of £975. It may be appropriate at this stage—as we may not have another occasion—for me to say that, as far as I am aware, that was the only misprint in the papers before us, and that those who have been responsible for producing these papers have done so in a remarkably accurate way. That is something to which we should pay tribute. The House has been greatly inconvenienced by the printing difficulties that we have been experiencing, but I am sure that it is grateful to those responsible for producing the papers that we have before us. Indeed, one of my hon. Friends has pointed out that in some cases the Xerox style of the Finance Bill is more convenient. One can see where it has been hacked about. This Bill has been hacked about more than most. Perhaps we should take that point into account on future occasions, though it is unlikely that a future Bill will be hacked about as much as this one has been.
The amendment is similar in content to one originally advanced by my hon. Friend the Member for Braintree (Mr. Newton) on the Floor of the House. The amendment raised an important point of principle. It is on this that I seek the Chief Secretary's comments. It is true that an allowance has not been given to those over pensionable age. We are all well aware of the age exemption arrangements and of the arrangements which, before the reform of personal direct taxation introduced by my right hon. Friend the Member for Altrincham and Sale (Mr. Barber), were made with regard to some investment income for pensioners, but there has not been an allowance of the kind suggested in the amendment. I therefore hope that the Chief Secretary will comment briefly on the principle involved.
In a period of rapid inflation where the position of pensioners and others is deteriorating steadily if they are living on something over and above the national insurance pension, which has tended to rise in line with inflation, we believe that this innovation should be made.
Last night, the Chief Secretary in discussing the more controversial matters that we have been debating, said that the question was one of priorities. This group is one to which we should give high priority. I do not see how other than through the tax system we can hope to deal with the set of problems affecting those on modest incomes. The amendment which we carried yesterday with regard to the £2,000 investment income limit will do quite a bit for certain people in this group, but it will not help everyone, and this amendment is supplementary to the amendment which we carried yesterday.
The problem is one not only of priorities but of overall cost. As my right hon. Friend the Shadow Chancellor of the Exchequer has pointed out, we are anxious to ensure that we act responsibly. I will not go over the ground which was debated a short time ago in the House on that matter. I believe that we have been acting responsibly.
The Chief Secretary will give us the precise cost, but I believe that the cost of carrying this amendment would be such that we shall not wish to press it to a Division. As the hon. Gentleman well knows, we have been suffering from a sad lack of economic forecasts up to the middle of next year. The Chancellor said tonight that he now has the latest economic forecasts. As he failed to produce the additional forecasts going to the middle of next year at the time of the Budget, for reasons which I thought were spurious but which he thought were valid—the reasons certainly are not valid now—he should produce the forecasts before he makes his statement next week so that we can see the reasons on which he is making his judgment.
This is an important group to which we should give priority. This being so, we are in the very unsatisfactory position of being asked to proceed with the Finance Bill now when the Chancellor himself has indicated that he proposes to make a statement next week, yet we shall not be able to return to this amendment after his statement.
I therefore hope that the Chief Secretary will be able to give us an indication of how we can overcome that difficulty. The traditional age-old statement by Treasury Ministers that they cannot anti-

cipate their right hon. Friend's Budget Statements should not be used throughout the year. Yet that is precisely the position we are getting into. We are even reaching the stage where Treasury Ministers will not anticipate their right hon. Friend's Budget Statement before we have even finished the Finance Bill on which his previous Budget judgment was based. This is a ludicrous position. I am not making a facetious point but a very serious one.
We are told that perhaps there is some scope for additional public expenditure but that is something on which we have yet to be convinced. If so, we are told, we must wait until next week to hear what the Chancellor proposes to do with his priorities rather than consider what we might do this week. As my hon. Friend the Member for St. Ives (Mr. Nott) pointed out, there seems to be a need for rethinking how Finance Bills are to be organised in the rather curious circumstances in which the House now finds itself.
I would not recommend to my hon. Friends that we should press this amendment to a Division but I would hope that we can get from the Chief Secretary a statement on a principle and in particular what else he proposes to do to help those on fixed incomes who are suffering badly from the problem of inflation.

Mr. Martin McLaren: rose—

Mr. Joel Barnett: I assure the hon. Member for Bristol, North-West (Mr. McLaren) that I rise to speak only in the hope that some information I can give to the House will be helpful and that I have no intention and would not wish to cut him out of any debate. I assure the hon. Member for Worthing (Mr. Higgins) that I do not complain about the perfectly understandable error. Indeed, I would like to join him in the tribute he paid to those who are producing our papers in very difficult circumstances. I am sure that they will be obliged to him for that tribute.
I doubt whether anyone in the House at the present time would be more surprised than the hon. Member for Worthing if at this moment I rose to give him the economic forecasts. I hasten to assure him I shall not do that. There


will have to be a little time before that happens. I hope he was not implying, however, that one can perhaps once a year decide the path of the economy and that from time to time it will not be necessary to have more than one Budget a year. That has happened under previous Chancellors and I imagine that it will happen in the future. I do not think the hon. Gentleman would complain about it if he were not in Opposition, but I say that in the nicest possible way.
As for the cost of the amendment, with his perfectly understandable error the hon. Gentleman added £25 million to the cost in a full year. As it appeared on the Amendment Paper, the amendment would cost £25 million in a full year. As amended, the cost would now be £50 million in a full year. I therefore understand why, if the hon. Gentleman did not feel able to press his hon. Friends to support the amendment when he thought that the cost was £25 million whereas in fact it is £50 million, he should feel even less able to press it now.
The amendment is very different from the case of the normal age exemption which we have known for a long time under different Chancellors—the age exemption relief which helps pensioners at the lowest level of income above the national insurance pension. What the amendment would do, however—we debated a similar one in Committee—would be to give in addition to the age exemption an increased personal allowance, for both single and married persons, to people over the age of 65. In so doing, of course, it would give tax relief to the greatest extent to those with the highest income, which is very different from the idea of the age exemption relief. Indeed those elderly millionaires of whom we know one or two would receive most from this amendment by comparison with the age exemption amendments.
9.0 p.m.
We have done a considerable amount about age exemption relief both in the Budget and in the Bill. We have increased the level of income limits to £810 for a single person and to £1,170 for a married couple. That offers considerable relief. In addition, of course, there are the tremendous increases in national insurance pensions that were made this

year and were referred to by my right hon. Friend in his Budget Statement.
I hope, therefore, that the hon. Member for Worthing will accept that in terms of priorities his proposal is not the best way of spending £50 million and, secondly, that this is not the best way of helping those over 65 at the lowest end of the income scale. Some of that £50 million would not go to those we most want to help. For those reasons, I am glad that the hon. Member is not prepared to urge his hon. Friends to support the amendment.

Mr. McLaren: I should like briefly to support the principle of the amendment even though the drafting may not be perfect. Elderly people should not be liable to pay as much tax as younger people and should have rather more help than is proposed in the Bill. There are clubs which have a benevolent rule that when a member has paid 50 annual subscriptions he is entitled to free membership for the rest of his life. Although we cannot go as far as that, it is as well to recognise that many retirement pensioners have been paying income tax for 50 years and should have some measure of relief.
Many of my constituents are, like me, very keen on this proposal. I support it because I believe that older people are less flexible in their ability to change their arrangements to suit changing circumstances and are especially hard hit by inflation. For example, there are many widows who are living in houses which are too big for them and who have been hard pressed by the unprecedented rise in rates. It is harsh to tell these people that they must move from the homes which they may love and with which they may have sentimental family associations.
Elderly people need to spend more than younger people on heating and are hard hit by the sharp increases in charges for fuel and power. At one time older people used to live with their married children, but now the tendency is more towards their having independent homes, and they are more expensive. For all these reasons I believe that people who are over 65 deserve specially favourable treatment from the Treasury, and I support the amendment. Even if it is withdrawn, I hope that next year we shall be


able to go a little further in this direction.

Mr. Higgins: I accept that the innovation represented by the amendment is one we need seriously to consider and no doubt my hon. Friends will wish to give it that consideration at a later stage, but in view of what the Chief Secretary said, and given my right hon. Friend's earlier remarks, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Joel Barnett: I beg to move Amendment No. 10, in page 8, line 43, at end insert—
'(4) In section 14 (additional relief for widows and others in respect of children) for the references to £130 there shall be substituted references to £180'.

Mr. Deputy Speaker (Mr. Oscar Murton): With this amendment it is convenient to take the following amendments:

No. 170, in line 43, at end insert—
'(4) In section 13 (relative taking charge of unmarried person's younger brother or sister) for the reference to £100 there shall be substituted a reference to £140'.

No. 171, in line 43, at end insert—
'(4) In section 12 (widower's or widow's housekeeper) and section 17 (claimant depending on services of daughter) for the references to £140 and £55 there shall be substituted references to £140'.

No. 172, in line 43, at end insert—
'(4) In section 16 (dependent relative) for the references to £100 there shall be substituted references to £140 and for the reference to £145 there shall be substituted a reference to £200'.

No. 173, in line 43, at end insert—
'(4) In section 18 (blind persons) for the references to £130 there shall be substituted references to £180 and for the references to £260 there shall be substituted references to £360'.

Mr. Barnett: Amendment No. 10 proposes that the additional personal allowance should be increased by £50, from £130 to £180. The cost of the increase is estimated to be £4 million in a full year.
When we debated the allowance in Committee on the Floor of the House, together with a number of other secondary allowances, I promised to examine them all. For reasons that I shall give shortly, it was not possible to deal with the smal-

ler ones, but I felt that in any case this would be by far and away the most useful.
The additional personal allowance is mainly for single-parent families. It is given to a man or woman who is entitled to the single person's allowance—such people include widows, widowers and divorced or separated people—and who has sole charge of a child living with him or her, for whom he or she receives the child tax allowance. It is also given, subject to similar conditions, to a married man whose wife is completely incapacitated for the whole of the tax year, on the grounds that the wife cannot then perform her normal duties of looking after the children.
I am sure that every hon. Member will recognise that this is an important relief, much more important than the smaller ones in the other amendments, though they are important. Those smaller ones include widower's or widow's housekeeper and child-minder allowances. To a considerable extent they have been displaced by the additional personal allowance. The Radcliffe Commission recommended the abolition of all those allowances and the daughter's service allowance.
There are other reasons. The cost of the amendments would not be great, but there are administrative problems. I know that when hon. Members hear of administrative problems they generally say "Well—", so I want to explain the serious consequences that would result if the amendments were carried. I am referring in particular to the staff consequences.
If those small amendments were carried, the main task would be to identify those who would become entitled to any increased allowance, which would involve examining the tax records of about 25 million PAYE taxpayers and picking out those affected. Once they had been identified, notices of the revised PAYE coding would have to be prepared and sent to the employee and his employer.
There is an additional difficulty in the case of an increase in the allowance for elderly people. The dependent relative allowance relates to the dependants of an elderly person as well. In some cases records will show that a taxpayer is over 65, but that is by no means invariably the case, and some means would have to be found to identify the remainder. It is


estimated that the recoding necessary to give an increase to the over-65s would require about 650,000 man hours of work, the equivalent of nearly 400 extra staff. If the other secondary personal allowances were raised at the same time, the staff cost would rise to about the equivalent of over 600 extra staff. The cash cost would be £650,000 for an increase in the allowance of the elderly only, and £1 million for a general increase in secondary allowances.
It is important to tell the House what would be the consequences of the proposals. There is the question whether in existing circumstances the work could be done. The Revenue staff have already had to work about 2·3 million hours of overtime to give effect to the taxation changes already made or announced and to revise the PAYE coding to take account of the increased State pension. One pays tribute to them for that.
Quite apart from the work burden and strain that this has entailed, it has been a particularly frustrating operation since the recoding for the increase in child allowances has had to be done virtually all over again in consequence of the proposal to increase the allowances for single-parent families.
There may be many further heavy tasks ahead for staff if we wish to make further allowances to the sort of people we have in mind. There is no spare space in the programme of work into which the extra work which would arise from the proposals could be fitted. In consequence there is grave danger of staff being strained to the utmost, or possibly beyond. It would be asking a lot of the staff if they were required to undertake a third PAYE recoding for 1974–75. I hope that the House will understand these reasons. The work for the men who have to do the recoding and the cost of paying them overtime would be substantial, in relation to the cost of the Opposition amendments.

Mr. Tony Newton: The hon. Gentleman has pre-empted the speech I hoped to make, and therefore I shall curtail my arguments if I am called later, but at the moment I intervene to ask why the work which must be involved in fulfilling the amendment which the hon. Gentleman is proposing cannot

also be applied to fulfilling the amendments which we are proposing. Presumably the Inland Revenue has to go through 25 million PAYE forms to fulfil the proposal in the Government's amendment. Why cannot this work also be applied to fulfil our amendments?

Mr. Barnett: The work involves identifying different classes of people in each case. There would be a much greater amount of work involved if the Opposition amendments were carried. I can assure the hon. Gentleman that this is the advice I am being given. I am not trying to pull any fast ones over him. I have been explaining the advice I have been given as to the consequences for staff and the administrative problems which would arise if the Opposition amendments were carried. I see that he accepts this, as I have had to accept it.
I hope that the hon. Gentleman will feel that I have gone a considerable way to fulfilling an undertaking which I gave earlier by bringing forward a not inconsiderable amendment on additional personal allowances. I have not sought to prejudge the hon. Gentleman's speech. I thought it would be helpful for the House to have this information.

Mr. Higgins: I understand the point that the Chief Secretary is making and I hope to comment on it in a moment, but is this problem related simply to the time of year? If the changes proposed were to be made at the beginning of the next PAYE year would similar problems arise? Are we to take it that any possibility of changes in the autumn Budget would be precluded for the same reasons that the Chief Secretary is now advancing?

Mr. Barnett: It would obviously be a different kind of problem. At the moment there have been a considerable number of recoding problems—for the increased pension, the additional personal allowance and so on. At another time there would be different problems. The situation would be different. One of the troubles with our system is that if there is one recoding because of a pension increase and another because of an increase in child allowances, whether family allowance subject to tax or the child allowance, then anything else is made much more difficult. We have to examine what creates the situation.
At the moment that is the position. I feel it right to advise the House about this because otherwise it might be voting without a full knowledge of the consequences. I hope that the House will accept my substantial amendment increasing the additional personal allowances.

9.15 p.m.

Mr. Newton: As I said a moment ago the Chief Secretary has skilfully—being a reasonable man I am forced to acknowledge it—resisted the amendments tabled in the names of myself and my hon. Friends the Members for Kingston-upon-Thames (Mr. Lamont) and Gloucestershire, South (Mr. Cope). My speech will therefore be briefer than I had originally intended because I understand the hon. Gentleman's expression of good will and would not wish to hold up the House unreasonably.
As the Chief Secretary has said, this situation reveals the profoundly unsatisfactory nature of our present tax system. I would be more disposed to accept the hon. Gentleman's apologies for this situation were it not for the fact that he represents a Government who appear to have turned their back on the tax credit scheme, which would have provided a way of bringing about a major simplification of the system, obviating many of the difficulties the hon. Gentleman now uses as arguments against helping widows, people looking after their younger brothers or sisters, elderly or infirm people being looked after by their daughters and blind persons. Those are the categories of people about whom we are talking. Although I understand the hon. Gentleman's arguments I do not think that the situation is satisfactory and it is worth While recording that fact.
We unequivocally welcome what the Chief Secretary has done in response to our pressure in Committee, by increasing the additional personal allowance in respect of children, to help the one-parent family. It would be disingenuous of me to pretend that I had waded through the whole of the Finer Report. We have had enough late-night Committee sittings to prevent me from staging my own late-night sitting to read that document.
The Chief Secretary said in Committee that he would be looking at the allowance in the light of the Finer Report. He has done so, and we are grateful. The Finer Report said that it thought there was a case for tax purposes for treating the one-parent family in the same way as the two-parent family. It went on to note that this principle was part of the tax credit system proposals. It said:
We welcome this proposal"—
that is, the tax credit proposal—
and think that some useful immediate help could be given to one-parent families by anticipating the improvement and increasing the additional personal allowance from £130 to £180 forthwith.
That, of course, is what the Chief Secretary has done.
It is important to note that the Finer Report then states:
Because the additional personal allowance is of value only to the better off families (many of them will be families headed by a man) we recognise that the number of families who would benefit from such a change would be small and far less than the number who would benefit under the tax-credit proposals. But we are in no doubt as to the desirability of putting the lone parent on a footing in this way with the married man, and we think the change worth making as an interim measure and a step towards the tax-credit system.
If my welcome for what the Chief Secretary has announced and what he is now seeking to put in the Bill is qualified, that is not because I regret in any way what he has done but because I would be a great deal happier, as I am sure would my right hon. and hon. Friends, if this were an interim step towards a tax credit scheme.
The situation in which we now find ourselves is that the tax credit scheme carefully worked out and properly planned by my right hon. Friends prior to February 1974 appears to have been cast into some kind of limbo. We are in an unsatisfactory situation regarding any guidance from the Government as to the kind of arrangements which they propose to put in the place of the scheme prepared by my right hon. Friends, if indeed they propose to put anything in its place.
It is right that we should regret that the step the Chief Secretary is proposing, which we support, should be a measure standing on its own and not an interim measure before the introduction of a


scheme to provide a real step forward in the long term to solve the problems about which we are all concerned.
I shall throw away the rest of the speech that I intended to make. I understand from what the Chief Secretary has said that it would be unfair, if we need to worry very much about fairness in this context, to the Inland Revenue to inflict on it the grave burden that he has described. Some of us may feel that the Inland Revenue puts quite enough burdens on us and that it might well be given a few in return. However, we understand the Chief Secretary's argument. No doubt it applies particularly to the dependent relative allowance which is dealt with in what is by far and away the most expensive of my amendments. It can be presumed that it would have affected by far the largest number of taxpayers.
I ask the Chief Secretary, in view of his generally conciliatory frame of mind and the reasonable way in which he has sought to demolish the arguments I have put forward, to consider the possibility of taking action on Amendment No. 173, which would increase substantially the personal allowance which is available to registered blind persons. It would be very cheap in terms of the kind of sums we have been discussing during the past two days.
I calculate from answers given to me by the Financial Secretary some weeks ago that that could not cost significantly more than £250,000. I believe that the registered blind, like the disabled who were discussed in another context yesterday, are in a category that most of us would wish to see receive special attention. Certainly that is the position I take.
Before agreeing not to pursue Amendments Nos. 170, 171, 172 and 173, I ask the Chief Secretary whether he can at least accept Amendment No. 173. It is a relatively limited amendment. It would cost very little money and would apply to a group of persons who perhaps have a special claim on the sympathy of all of us in the House.

Mr. William Baxter: Put the Question.

Mr. Higgins: I am surprised that the hon. Member for West Stirlingshire (Mr.

Baxter) should say "Put the Question". This is an important matter concerning many people for whom I should have thought the House as a whole would have considerable sympathy. The fact is—

Mr. Baxter: rose—

Mr. Higgins: —that all of us without exception have special sympathy for them. The Chief Secretary has expressed sympathy for them and has recognised that they represent a group which deserves special attention.
It is unfortunate that the present system does not allow us to go ahead with the kind of measure which the Chancellor might have put in his Budget, in which case the problem would not have arisen. That is one of the many reasons why my hon. Friends and I believe that we should move towards the tax credit scheme. In the previous administration the legislation was ready for drafting and the scheme could have been included in the Finance Bill had a Conservative Government been returned to power. That scheme would have effected an immense improvement in the administrative arrangements. It would have enabled us to deal compassionately and effectively with the group of people covered by the amendment. The change of policy on a matter on which the previous administration hoped to reach all-party agreement is regrettable.
Although the House is always reluctant to accept administrative impossibility as an answer, I understand what the Chief Secretary said. I also understand that my hon. Friends, with one exception, do not wish to press the amendments. The cost of the allowance for the blind is very small. It is possible that the immense sifting operation referred to by the Chief Secretary would not be necessary for this group of persons. I do not recall the technicalities of what the Chief Secretary said, but unless it is necessary to sift just as many people to get at this group as to get at all the groups it may be that the administrative difficulties of granting this relief for the blind are not so great.
In earlier debates in Committee the Chief Secretary did not put forward these administrative difficulties. He made no reference to them whatever. Had we known about them earlier it might have


been possible to have included the sifting operation in the other operations. Perhaps we can be given an explanation of that.
The House is anxious to make progress. I am sorry that it is not possible to press these matters to a conclusion, but I am sure that my hon. Friend is right to raise them and in particular to stress the importance we place on changing the system to a more equitable one based on the tax credit scheme.

Mr. Joel Barnett: I am sorry if I ruined the speech of the hon. Member for Braintree (Mr. Newton). I did not mean to do so, but I thought the House would find it helpful to know the administrative problems.
The hon. Member for Worthing (Mr. Higgins) asked why I did not tell the House previously about the administrative problems. I could not do so because I was not aware of them. I gave an undertaking in Committee to look at the secondary allowances and when I did so I found these difficult administrative problems.
I agree that the proposed relief for the registered blind would not cost a great deal, but I regret to say that there are similar administrative problems. I am advised that it would be necessary to review all the records. One could not expect a registered blind person to make his repayment claim. Recoding would have to be done and records would have to be checked. I should have liked to do this, but there might perhaps be a better opportunity to do it in 1975–76 when the recodings can all be done together.
I will try not to be tempted to widen the debate. Both hon. Gentlemen know my reasons for disagreeing with them about the scheme to which they referred—

Mr. Jeffrey Archer: When the Chief Secretary talks about 1975–76, will he remember that the blind have been at the back of the queue in respect of handicapped people? Therefore, should not their situation be considered as quickly as possible?

Mr. Barnett: I promise the hon. Gentleman that I shall do that next year and in any other years when the Labour Government present Finance Bills. I hope

that the amendment will be acceptable to the House.

Amendment agreed to.

9.30 p.m.

Mr. Joel Barnett: I beg to move Amendment No. 174 in page 9, line 10, leave out subsection (6).
The amendment tidies up Clause 13 of the Bill by leaving out subsection (6), which is no longer necessary. The subsection provides that PAYE adjustments to take account of changes in personal allowances need not be made before 20th July. The subsection was included in the Bill to ensure that the Revenue would not be under a legal obligation to issue new codings before 20th July if the Bill had received the Royal Assent before that date. It is now clear that the Royal Assent cannot be given before that date and subsection (6) thereby becomes redundant.

Amendment agreed to.

Clause 15

RESTRICTIONS ON RELIEF FOR INTEREST

Mr. Pardoe: I beg to move Amendment No. 200, in page 9, line 35, leave out paragraph (b) and insert—
'(b) at the end of subsection (1) there shall be added the following words: "Provided always that as regards any debt incurred after August 1st 1974 for which this Section gives relief the amount of interest thereon shall only be deducted from or set off against a person's income for the purpose of assessing that person's liability to income tax at the basic rate only, and no relief thereon shall be given in respect of higher rates of tax or the investment income surcharge "'.
This is a remarkable amendment since it proposes to increase Government revenue from the better off. It is a redistributive measure, and if the Government do not accept every dot and comma of the amendment, I hope that they will accept its spirit and its main purpose.
Normally in these discussions one asks the Government how much a particular proposal will cost. In this case I must ask the Government how much the amendment will not cost—in other words, what is the negative cost of the provision, and how much extra revenue will the Government obtain if it goes through?
My colleagues and I entirely agree with the Government's decision to limit the tax relief on mortgages below a certain figure. One can argue whether £25,000 is a correct figure. It sounds fairly large in some parts of the country, but it is not so large elsewhere. However, the Government have settled for a national figure and I shall not argue about its size.
We should be certain—and this is the purpose of the amendment—about what we are trying to do in limiting the top level of mortgages in terms of tax relief. We are trying to limit the amount of tax so that the Government may help owner-occupiers in buying their own homes. That is a purpose which hon. Members in all parts of the House will share. We also want to concentrate whatever money is available from the public purse for the encouragement of owner-occupation upon those who most need it, especially those who cannot afford to buy homes without Government help.
Under the Bill as it is drafted, the interest on a loan up to £25,000 obtained for house purchase or for improvement will be allowed against all rates of tax. Our amendment seeks to limit the relief to the basic rate of tax only.
Let me give some examples of what the amendment will do, because these demonstrate its effectiveness with greater clarity. My first example is a loan of £25,000 and a rate of interest of 11 per cent. I take the top end of the scale and someone with what to most of us is a grotesque income of £25,000 plus £5,000 investment income. There are such people. Under our arrangements, the relief would be £900. Under the Government's proposals, the relief from the public purse to such a person would be £2,700. We do not want to give a tax concession of £2,700 out of the public purse to encourage someone with an income of £25,000 plus an investment income of £5,000 a year to buy a house.
Example No. 2 is again a £25,000 loan and again an 11 per cent, rate of interest. In this case, the individual has two children, an earned income of £11,000 and an investment income of £2,000. Under the Government's proposals, the relief would be £1,700. Under our proposal, it would be £900.
My third example comes down to a level which most of us can understand

since it involves a £10,000 loan, again with an interest rate of 11 per cent. In this case the person concerned has an earned income of £8,000. Under the Government's proposals, the relief would be £500. Under our proposals, it would be £360.
My final example is a £10,000 loan, again at a rate of interest of 11 per cent. In this case, however, the individual has an earned income of £6,000 plus £2,000 unearned income. Under the present system, he gets £600 relief. Under our proposal, it would be £360.
It seems to my right hon. and hon. Friends, therefore, that this amendment goes along the route which the Government have already charted. It is fair and just. It is redistributive. It uses the public money available for the encouragement of owner-occuption in a much better fashion.
If I may mention the investment income surcharge, surely most people who pay the surcharge will have capital available. If a person has it directly in his own name, he derives the investment income from that capital directly, and he can sell that capital for the purpose of buying a house or improving the house that he already owns. Alternatively, if the capital is not in his name but he has an income from investments under a settlement, normally he can raise money from the source from which the income comes. Certainly it can be raised against that source. Should we use public money to encourage such people to borrow for house purchases?
If we pass this amendment, such people will be discouraged from borrowing. More funds will be available for house purchase for those who need it. Another consequence may be that interest rates on money for house purchase are kept down.
Lastly, whilst those requiring a mortgage in circumstances where they can set off the interest only at the basic rate of tax would not normally try to borrow more than they need, those who can set off most of their interest against tax—those in the higher tax bracket—would sometimes deliberately purchase for investment reasons residences more expensive than they would otherwise be happy to acquire. People in that category try to obtain high loans, and they will inevitably go for the maximum available


on the same principle as most people took up their full sweets ration during the war. We wish to discourage those at the top end of the income scale. Therefore, I hope that the Financial Secretary will feel able to accept this egalitarian, immensely radical and redistributive amendment which will go some way to paying for one or two of the amendments which we have helped to pass in the last two days.

The Financial Secretary to the Treasury (Dr. John Gilbert): This amendment, like so many of the proposals emanating from the Liberal Party, has a certain attractive simplicity. But the hon. Member for Cornwall, North (Mr. Pardoe) has misunderstood the purpose behind the whole corpus of the Government's proposals in the sphere of interest relief. We are not setting out to discourage anyone from borrowing for house purchase. We have set out to discourage the expenditure of money on expensive homes and on second homes. That has been the principal thrust of our purpose.
The hon. Gentleman quite legitimately took illustrations from certain high income situations. The effect of his proposal would start to bite on the man or woman with a mortgage whose income was about £6,000 a year—a little higher if there were children and a little lower if there were not. We do not consider that relief should be tapered off for people who are not considered wealthy at that level of income.
Moreover, there are various administrative reasons for the Government not recommending this proposal to the House despite all its superficial attractiveness. If the amendment were adopted we would find ourselves with three separate sets of rules covering house purchase. For debts incurred on or before Budget Day there would be full relief for up to six years. Qualifying loans taken out after Budget Day but before 1st August—the hon. Gentleman has put 1st August in his amendment, presumably to avoid any charge on retrospection—would apparently still qualify for relief in full at both the basic and higher rates until they were finally paid off. Loans taken out after 1st August would be eligible for relief only against the basic rate. In other words, there would be three sets of rules

operating simultaneously according to the dates on which the loans were taken out.
There is a further difficulty. The amendment as drafted would have the effect, no doubt unintentional, of restoring relief for interest paid on overdrafts, credit card debits and similar arrangements. We have sought to end relief in those directions with a transitional period of 12 months.
Finally, the denial of relief to the higher rates of income tax would introduce fresh complications into the PAYE system. The House will appreciate that under the unified tax system it is a complicated matter to give relief against the basic rate of tax and not against the higher rates of tax. All in all, the Government believe that the 1969 type of legislation, to which we have reverted, with the new restrictions on interest for large properties and second homes, is to be preferred to the course advocated by the hon. Gentleman.

9.45 p.m.

Mr. George Cunningham: I accept the statement of my hon. Friend the Financial Secretary that administratively the amendment would be inconvenient and inappropriate. For that reason I would not support the Liberal Party if it went to a Division on this matter tonight.
Nevertheless, my hon. Friend has overstated the case against the principle of the amendment. Some of us have been arguing for a long time before the Liberal Party thought of it that the relief given to mortgage borrowers was excessive and that in particular an amendment of this kind was needed to give to those who paid the higher rate of tax the same amount of tax relief as is given to the basic rate tax payer. That principle has already been adopted in the past in relation to insurance relief. It does not apply at the present time. It applied in the past when the relief was restricted to the relief that would have been given to a person paying at the basic rate.
The hon. Member for Cornwall, North (Mr. Pardoe) gave his examples in relation to the total amount of cash relief that would be provided. I think that a more telling way of making the point is to take the effective interest rate that a taxpayer, at various marginal rates of


tax, pays after taking account of the tax relief which he receives.
Assuming that a borrower is paying 11 per cent. gross, if he is a basic rate taxpayer his net cost is 7·4 per cent. Some people find it difficult to accept that even at the basic rate a person can borrow from a building society and re-lend the same money to the same branch of the same building society and turn a profit on it because of the difference in the incidence of tax on the borrowing and the lending of money in relation to building societies.
The difference becomes greater when one considers a person who is paying a marginal rate of tax higher than the basic rate. A person paying at the basic rate has a net cost of 7·4 per cent. A taxpayer paying at the marginal rate of 38 per cent. is paying for his money only 6·8 per cent. At a maginal rate of 43 per cent. he is paying only 6·3 per cent. At a maginal rate of 48 per cent. he is paying only 5·7 per cent. At the top of the scale, in the case of a person paying at the marginal rate of 83 per cent., which is very unusual, his borrowing costs him only 1·9 per cent. No sane person would arrange such a thing if he was starting from scratch.
We have arrived at that position only due to habit, not looking at what we are doing, and a conceptual error. The conceptual error has always been that payment of interest has been defined in In-lard Revenue as an outgoing and not as an allowance; it has been treated as an expense necessarily encountered in acquiring the income in question, which it certainly is not. Therefore it is right that the total amount of income claimable against this relief should be limited, as is being done in this Finance Bill, and the total amount of relief in respect of that limited amount should also be limited.
I hope that in future the Government will be able to move over to a system in which all tax reliefs are expressed as deductions from the amount of tax payable, as compared with the present system in which tax relief is a deduction from the amount of income which is taxable. That would achieve the same objective as is proposed by the amendment. It would also apply to all of other allowances. As a result, a child allowance

would be worth no more to the rich man than to the poor man so long as he paid tax at all. This would give some of the advantage of a tax credit scheme without the disadvantages of the scheme that the Conservative Party proposed.
Therefore, before the next principal Budget I hope that Treasury Ministers will look seriously at the principle behind the amendment. It should have been accepted long ago and it should be applied not only to relief on interest payments but to all other tax allowances and outgoings as well.

Mr. Richard Wainwright: In supporting the amendment, I should like to take up the underlying concept of the speech of the hon. Member for Islington, South and Finsbury (Mr. Cunningham) and to explain how the amendment fits in with basic Liberal fiscal thinking—[Laughter.] Hon. Members may laugh, but their former colleague Lord Houghton, who used to be the Member for Sowerby, and who I believe enjoys a great deal of respect on their benches, commended the most recent Liberal tax document as the most advanced fiscal thinking he had come across.
In our view, there is only one circumstance in which interest should be allowed against income for tax purposes. I think that we engage the sympathy of some hon. Members opposite in saying that over the years the provision of relief on interest charged to a taxpayer has been far too expensive and has been grossly abused by surtax payers.

Mr. Tomlinson: We have been saying that for years.

Mr. Wainwright: So have we, and I am saying it now.
In our view, the only interest allowable against tax is interest which can be shown to be related to income which will be taxed. In other words, where a taxpayer has entered into a bargain to borrow money in order to invest, it is surely clear that before he is taxed on the proceeds of his investment annually, he should be allowed to set off the cost of the funds he has invested. To allow interest, as Governments of both parties have regrettably done for many years, on money borrowed for all kinds of personal


enjoyment and living purposes is inexcusable. There is no reason why interest on that kind of borrowing or borrowing to indulge in the sort of facilities that the banks have been so mistakenly advertising in this time of inflation, should have been allowed against tax. We have supported many of the attempts of Labour Members to bring that under control. Hence, the amendment seeks to limit the extent to which higher taxpayers can avail themselves of that facility.
We recognise that we cannot hope, nor would it be fair, to achieve in a year or two the ultimate in Liberal tax designs, because many people have entered into bargains and arrangements on the strength of a well-established though mistaken fiscal philosophy. But the amendment signals the fact that we have no sympathy with surtax and investment surcharge payers who indulge in widespread borrowing. We seek to limit this relief as far as possible and as soon as possible to borrowings which give rise to investments which are a source of taxable income, and to them alone.

Mr. Brian Sedgemore: It has been pleasant to hear the hon. Member for Cornwall, North (Mr. Pardoe) in one of his egalitarian flushes, because he blows hot and cold in these matters. We both spent 70 hours in Committee on the Finance Bill. He was once one of those who pressed vigorously to raise the £25,000 limit every six months in accordance with the rise in the retail price index, even if the cost of housing fell. He put it forward as one of his magnificent examples of indexing which was designed to prevent the redistribution of income. I am glad that he has put forward this proposal, which is designed to ensure the redistribution of income.
The Financial Secretary's reply, with great respect, was wholly unsatisfactory. A number of us on the Government side of the House would like the Financial Secretary to accept the principle behind the amendment, even though we realise that there are certain administrative difficulties and, as one would expect with a Liberal amendment, it would cause administrative chaos. However, the reply was not good enough.
In all that I have read of the Chancellor of the Exchequer, I have come to the conclusion that on this problem he is

concerned about excessive relief of this type. I am sure that he does not cry for people who earn over £6,000 a year and that his heart does not bleed for people who buy houses and who have a thumping great investment income. If the Financial Secretary is to keep us out of the Division Lobby, assuming that the amendment is pressed, we need a statement from him that he will accept this proposal in principle, if not in the October Budget certainly in the Budget next April.

Dr. Gilbert: I think that I made it clear in my earlier remarks that I thought that the principle put forward by the hon. Member for Cornwall, North (Mr. Pardoe) was attractive. I entirely agree with what my hon. Friend the Member for Luton, West (Mr. Sedgemore) and my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) had to say on this subject. This is a very complex matter, involving the whole question of getting equity into the supply of housing finance and subsidies, both as between the private sector and the rented local authority sector.
My hon. Friends are well aware that we on the Government side of the House have long felt that the scales were weighted very heavily in favour of those who are fortunate enough to be able to buy their property on a mortgage with the benefit of tax relief, to say nothing of the absence of the old Schedule A arrangements, the availability of grants and the freedom from capital gains tax for owner-occupiers. There is a whole array of assistance available to the owner-occupier, which we have certainly taken into account. I will say to my hon. Friend the Member for Luton, West that we have gone quite a long way already. We are by no means at the end of the road in this matter, and we should be happy—in fact, we intend—to look at this whole question again in the time horizon specified by my hon. Friend.
One could certainly construct a very attractive scenario in which all interest relief was withdrawn and the money was used to bring down the cost of mortgage finance to everyone who is buying a house on a mortgage so that the relief would go to everyone, regardless of income—given the present constraints, which we would not dream of abandoning, the size of the mortgage and the fact that it


should go only for someone's main and only residence. I assure my hon. Friend that those are all possibilities and are being considered. I hope that he will take it from me that we are considering them. Obviously I cannot give him a commitment.
He is absolutely right that the results of the amendment, though attractive in principle—as I said to the hon. Member for Cornwall, North in my initial remarks—would lead to administrative difficulties. It is for that reason that I am afraid that I am unable to commend the amendment to my hon. Friends.

Mr. Pardoe: With your leave. Mr. Speaker, I should like briefly to reply to what the Financial Secretary has said. He said that he had stated in his opening remarks that he found this amendment attractive. Actually, he was unable coming from the Liberal Party. That to restrain himself from saying that he found it "superficially" attractive, and he made some snide comment about it was the reason for that remark.
The Financial Secretary has not set out any specific reasons why the principle cannot be accepted or, indeed, why the amendment cannot be accepted. Inevitably, any Treasury Minister will say that it is impossible to administer. I do not believe that. If the interest is paid by

the mortgagor gross, it is perfectly simple. He has to claim back the relief, and he claims it back at the basic rate. If the interest is paid net, it can be deducted only at the basic rate. It is as simple as that. It does not take a Treasury team of complicated accountants and mathematicians to work that out.

10.0 p.m.

The hon. Member for Luton, West (Mr. Sedgemore) was right in saying that this is a redistributive and egalitarian amendment and that I supported—indeed, advanced—an amendment to index-link the £25,000. However, he gave the game away by saying that inflation is redistributive. Some of us believe that that is why the Labour Party likes inflation a darned sight too much. If I wanted to be egalitarian and to redistribute income it should be done by the proper methods, openly and above board through Acts of Parliament and not by stealth by letting the inflation rate rip.

For these reasons, my hon. Friends and I, notwithstanding what the Financial Secretary said—he did not advance substantial reasons—intend to press this very necessary amendment to a Division.

Question put, That the amendment be made:

The House divided:Ayes 24, Noes 274.

Division No. 88.]
AYES
[10.1 p.m.


Beith, A. J.
Mudd, David
Thorpe, Rt. Hn. Jeremy


Freud, Clement
Normanton, Tom
Tyler, Paul


Grimond, Rt. Hn. J.
Redmond, Robert
Wainwright, Richard (Colne Valley)


Henderson, Douglas (Ab'rd'nsh're.E)
Reid, George
Watt, Hamish


Hooson, Emlyn
Ross, Stephen (Isle of Wight)
Wilson, Gordon (Dundee, E.)


Howells, Geraint (Cardigan)
Smith, Cyril (Rochdale)



Johnston, Russell (Inverness)
Steel, David
TELLERS FOR THE AYES:


Kilfedder, James A.
Stewart, Donald (Western Isles)
Mr. John Pardoe and


MacCormick, Iain
Taverne, Dick
Dr. Michael Winstanley.


Mayhew, Christopher(G'wh, W'wch, E)






NOES


Abse, Leo
Bradley, Tom
Conlan, Bernard


Allaun, Frank
Broughton, Sir Alfred
Cook, Robert F. (Edinburgh, C.)


Armstrong, Ernest
Brown, Bob (Newcastle upon Tyne, W.)
Cox, Thomas


Atkinson, Norman
Brown, Hugh D. (Glasgow, Provan)
Craigen, J. M. (G'gow, Maryhill)


Bagier, Gordon, A. T.
Buchan, Norman
Cronin, John


Barnett, Joel (Heywood &amp; Royton)
Butler, Mrs. Joyce (H'gey, WoodGreen)
Crosland, Rt. Hn. Anthony


Bates, Alf
Callaghan, Jim (M'dd'ton &amp; Pr'wch)
Cryer, G. R.


Baxter, William
Campbell, Ian
Cunningham, G.(Isl'ngt'n, S &amp; F'sb'ry)


Bennett, Andrew F. (Stockport, N.)
Cant, R. B.
Cunningham, Dr. John A. (Whiteh'v'n)


Bidwell, Sydney
Carmichael, Neil
Dalyell, Tam


Bishop, E. S.
Carter, Ray
Davidson, Arthur


Blenkinsop, Arthur
Carter-Jones, Lewis
Davies, Bryan (Enfield, N.)


Boardman, Tom (Leicester, S.)
Castle, Rt. Hn. Barbara
Davies, Denzil (Llanelli)


Booth, Albert
Cocks, Michael
Davies, Ifor (Gower)


Boothroyd, Miss Betty
Cohen, Stanley
Davis, Clinton (Hackney, C.)


Botlomley, Rt. Hon. Arthur
Coleman, Donald
Deakins, Eric


Boyden, James (Bishop Auckland)
Colquhoun, Mrs. M. N.
Dean, Joseph (Leeds, W.)




de Freitas, Rt. Hn. Sir Geoffrey
Jones, Alec (Rhondda)
Phipps, Dr. Colin


Delargy, Hugh
Judd, Frank
Prentice, Rt. Hn. Reg.


Dell, Rt. Hn. Edmund
Kaufman, Gerald
Prescott, John


Dempsey, James
Kelley, Richard
Price, Christopher (Lewisham, w.)


Doig, Peter
Kerr, Russell
Price, William (Rugby)


Douglas-Mann, Bruce
Kilroy-Silk, Robert
Radice, Giles


Duffy, A. E. P.
Kinnock, Neil
Rees, Rt. Hn. Merlyn (Leeds, S.)


Dunn, James A.
Lambie, David
Richardson, Miss Jo


Dunnett, Jack
Lamborn, Harry
Rifkind, Malcolm


Dunwoody, Mrs. Gwyneth
Lamond, James
Roberts, Albert (Normanton)


Eadie, Alex
Lamont, Norman
Roberts, Gwilym (Cannock)


Edelman, Maurice
Lawson, George (Motherwell &amp; Wishaw)
Robertson, John (Paisley)


Edge, Geoff
Leadbitter, Ted
Roderick, Caerwyn E.


Edwards, Robert (W'hampton, S.E.)
Lee, John
Rodgers, George (Chorley)


Ellis, John (Brigg &amp; Scunthorpe)
Lestor, Miss Joan (Eton &amp; Slough)
Rodgers, William (Teesslde, St'ckton)


Ellis, Tom (Wrexham)
Lewis, Arthur (Newham, N.)
Rooker, J. W.


English, Michael
Lewis, Ron (Carlisle)
Roper, John


Ennals, David
Lipton, Marcus
Rose, Paul B.


Evans, Fred (Caerphilly)
Loughlin, Charles
Ross, Rt. Hn. William (Kilmarnock)


Evans, Ioan (Aberdare)
Loyden, Eddie
Rowlands, Edward


Evans, John (Newton)
Lyons, Edward (Bradford, W.)
Sandelson, Neville


Ewing, Harry (St'ling, F'kirk &amp; G'm'th)
Mabon, Dr. J. Dickson
Selby, Harry


Fernyhough, Rt. Hn. E.
McCartney, Hugh
Shaw, Arnold (Redbridge, Ilford, S.)


Fitch, Alan (Wigan)
McElhone, Frank
Shaw, Michael (Scarborough)


Flannery, Martin
MacFarquhar, Roderick
Sheldon, Robert (Ashton-under-Lyne)


Fletcher, Raymond (Ilkeston)
MacGregor, John
Shore, Rt. Hn. Peter(S'pney &amp; P'plar)


Fletcher, Ted (Darlington)
McGuire, Michael
Short, Rt. Hn. E. (N'ctle-u-Tyne)


Foot, Rt. Hn. Michael
Mackenzie, Gregor
Short, Mrs. Ren&amp; ée (W'hamp'n, N.E.)


Ford, Ben
Maclennan, Robert
Sillars, James


Forrester, John
Macmillan, Rt. Hn. M. (Farnham)
Silverman, Julius


Fowler, Gerry (The Wrekin)
McMillan, Tom (Glasgow, C.)
Small, William


Fraser, John (Lambeth, Norwood)
McNamara, Kevin
Smith, John (Lanarkshire, N.)


Freeson, Reginald
Madden, M. O. F.
Snape, Peter


Galpern, Sir Myer
Magee, Bryan
Spearing, Nigel


Garrett, John (Norwich, S.)
Mahon, Simon
Spriggs, Leslie


Garrett, W. E. (Wallsend)
Mallalieu, J. P. W.
Stallard, A. W.


George, Bruce
Marks, Kenneth
Stewart, Ian (Hitchin)


Gilbert, Dr. John
Marquand, David
Stewart, Rt. Hn. M. (H'sth, Fulh'm)


Ginsburg, David
Marshall, Dr. Edmund (Goole)
Stoddart, David (Swindon)


Golding, John
Marlen, Neil
Stonehouse, Rt. Hn. John


Gourlay, Harry
Meacher, Michael
Stott, Roger


Graham, Ted
Mellish, Rt. Hn. Robert
Strang, Gavin


Grant, George (Morpeth)
Mendelson, John
Strauss, Rt. Hn. G. R.


Grant, John (Islington, C.)
Mikardo, Ian
Summerskill, Hn. Dr. Shirley


Griffiths, Eddie (Sheffield, Brightside)
Millan, Bruce
Thomas, Jeffrey (Abertillery)


Hamilton, William (Fife, C.)
Miller, Dr. M. S. (E. Kilbride)
Tierney, Sydney


Hamling, William
Mills, Peter
Tinn, James


Hardy, Peter
Milne, Edward
Tomlinson, John


Harper, Joseph
Miscampbell, Norman
Tomney, Frank


Harrison, Walter (Wakefield)
Mitchell, R. C. (S'hampton, Itchen)
Torney, Tom


Hart, Rt. Hn. Judith
Molloy, William
Tuck, Raphael


Hatton, Frank
Moonman, Eric
Urwin, T. W.


Healey, Rt. Hn. Denis
Morris, Alfred (Wythenshawe)
Varley, Rt. Hn. Eric G.


Heffer, Eric S.
Morris, Charles R. (Openshaw)
Wainwright, Edwin (Dearne Valley)


Hooley, Frank
Morris, Rt. Hn. John (Aberavon)
Walker, Harold (Doncaster)


Horam, John
Moyle, Roland
Walker, Terry (Kingswood)


Howell, Denis (B'ham, Small Heath)
Mulley, Rt. Hn. Frederick
Weitzman, David


Huckfield, Leslie
Newens, Stanley (Harlow)
Wellbeloved, James


Hughes, Rt. Hn. Cledwyn (Anglesey)
Nott, John
White, Jamas


Hughes, Mark (Durham)
Oakes, Gordon
Whitehead, Phillip


Hughes, Robert (Aberdeen, North)
Ogden, Eric
Whitlock, William


Hughes, Roy (Newport)
O'Halloran, Michael
Willey, Rt. Hn. Frederick


Hunter, Adam
O'Malley, Brian
Williams, Alan (Swansea, W.)


Hutchison, Michael Clark
Onslow, Cranley
Williams, Rt. Hn. Shirley(H'f'd &amp; St'ge)


Irvine, Rt. Hn. Sir A. (L'p'I, EdgeHI)
Orbacll, Maurice
Williams, W. T. (Warrington)


Irving, Rt. Hn. Sydney (Dartford)
Ovenden, John
Wilson, Alexander (Hamilton)


Jackson, Colin
Owen, Dr. David
Wilson, William (Coventry, S.E.)


Jay, Rt. Hn. Douglas
Padley, Walter
Woodall, Alee


Jeger, Mrs. Lena
Palmer, Arthur
Woof, Robert


Jenkins, Rt. Hn. Roy (B'ham, St'fd)
Park, George (Coventry, N.E.)
Wrigglesworth, Ian


John, Brynmor
Parker, John (Dagenham)
Young, David (Bolton, E.)


Johnson, James (K'ston uponHull, W)
Parry, Robert



Johnson, Walter (Derby, S.)
Pavitt, Laurie
TELLERS FOR THE NOES:


Jones, Barry (Flint, E.)
Peart, Rt. Hn. Fred
Mr. J. D. Dormand and


Jones, Dan (Burnley)
Pendry, Tom
Mr. James Hamilton


Jones, Gwynoro (Carmarthen)
Perry, Ernest G.

Question accordingly negatived.

Dr. Gilbert: I beg to move Amendment No. 11, in page 9, line 56, leave out subsection (4) and insert—
'(4) Interest is excepted from subsection (3) above if it is payable on a debt incudred on or before 26th March 1974 or on a debt replacing one so incurred and—

(a) where it is payable on an overdraft, it is payable before 6th April 1975; and
(b) where it is not payable on an overdraft but on a debt replacing an overdraft, the overdraft was replaced (either by the debt on which the interest is payable or by another debt which was not an overdraft) before 6th April 1975 and the interest is payable before 6th April 1980; and
(c) in any other case the interest is payable before 6th April 1980;
but where the interest is payable on an overdraft or on a debt replacing an overdraft it shall be eligible for relief to the extent only that it or, as the case may be, the amount on which it is payable, does not exceed the limit imposed by subsection (5) below.'

Mr. Speaker: With this amendment we may also consider the following amendments to Amendment No. 11:

Amendment (a), in subsection (4)(a) leave out '1975' and insert '1976'.

Amendment (b), in subsection (4)(b) leave out '1975' and insert '1976'.

Amendment (c), in subsection (4)(b) leave out '1980' and insert '1984'.

Amendment (d), in subsection (4)(c) leave out '1980' and insert '1984'.

It may also be convenient to consider the following amendments:

No. 81, in page 10, line 2, leave out 'and paid before 6th April 1975' and insert 'before 6th April 1976'.

No. 82, in page 10, line 6, leave out '1980' and insert '1984'.

No. 12, in page 10, line 16, leave out from balance' to end of line 20 and insert:
on 26th March 1974 of the overdrawn account and at the rate at which interest on that balance was chargeable on 26th March 1974 and the limit on the amount interest payable on which is excepted by paragraph (b) of that subsection is that debit balance.

(6) For the purposes of this section—

(a) a debt replaces another if it is incurred for the purpose of discharging that other debt or a debt replacing it; and
(b) a debt incurred by overdrawing an account which had a debit balance on 26th March 1974 shall be treated as incurred on or before that date; and

(c) a debt incurred by debiting the account of a person as the holder of a credit card or under similar arrangements shall be treated as incurred by overdrawing that account and "overdraft" shall be construed accordingly.'

No. 13, in page 10, line 28, leave out 'in writing'.

No. 14, in page 10, line 29, at end insert:
'and that the offer either was in writing or was evidenced by a note or memorandum made by the lender on or before that date.'

No. 15, in page 10, line 30, leave out
'the obligation to pay the interest'
and insert
'the debt on which the interest is payable

No. 23, in Schedule 1, page 42, line 9. at end insert:
'and the relief referred to in the words so substituted in paragraph 1(c) of that Schedule shall include any relief by virtue of section 15(4) of this Act'.

No. 33, in page 44, line 52, at end insert:
'(2) The relief referred to in sub-paragraph (1)(c) above includes any relief by virtue of section 15(4) of this Act'.

No. 34, in page 45, line 23, at the end insert:
'(2) The relief referred to in sub-paragraph (1)(c) above includes any relief by virtue of section 15(4) of this Act'.

No. 35, in page 46, line 42, at end insert:
'(2) The reference in sub-paragraph (1)(b) above to relief by virtue of this paragraph shall be construed as including any relief by virtue of section 15(4) of this Act'.

No. 36, in page 48, line 10, at end insert:
'at the rate at which interest on that balance was chargeable on 26th March 1974'.

No. 37, in page 48, line 11, leave out paragraph (c) and insert:
'(c) so much of the interest paid in the year of assessment for which the claim is made as was payable after 26th March 1974 and before 6th April 1975'.

Dr. Gilbert: Many amendments have been grouped together, but I shall unfortunately have to refer to several groups separately. I shall keep my remarks as brief as possible, and I hope I shall be acquitted of any discourtesy to the House on that account.
First, I shall deal with Amendments Nos. 11, 12 and 15, which are Government amendments. They make important


changes in the provision of transitional relief for interest on money borrowed before Budget Day. They meet completely the undertaking I gave in Standing Committee to allow relief to continue where a pre-Budget loan or overdraft is paid off by means of further borrowing within the transitional period. They also contain a further important transitional concession about overdraft interest.
The amendments have three purposes. First, in relation to the one-year relief for overdraft interest, the requirement that the interest should be both payable and paid before 6th April 1975 has been dropped. This was the subject of considerable discussion in Standing Committee and I hope this will commend itself to the House.
Secondly, the amendments honour my undertaking to provide transitional relief where a pre-Budget overdraft or loan for a non-qualifying purpose is replaced within the transitional period—

Mr. Speaker: Order. There are too many conversations going on.

Dr. Gilbert: The relief accords with amendments proposed in Committee by the hon. Members for Worthing (Mr. Higgins), Croydon, South (Mr. Clark) and Ludlow (Mr. More).
Finally, the amendments contain one new concession. We have decided that it would be right to allow someone who has borrowed on overdraft before Budget Day to finance non-qualifying expenditure, to convert the overdraft into another form of loan and so obtain the benefit of transitional relief for six years instead of one year.
10.15 p.m.
The overdraft reliefs must meet three conditions. First, the interest must itself qualify for relief. Secondly, the conversion must be effected before 6th April next year, when the transitional relief runs out. Thirdly, the amount of the conversion is limited to the debit balance on Budget Day.
The effect of this concession is to avoid an arbitrary difference between people who happen to have borrowed for similar purposes in different ways before Budget Day.

Mr. Higgins: Am I correct in understanding that that is only in the case of qualifying purposes?

Dr. Gilbert: That is not so. It is to cover all borrowings before Budget Day
I turn to the amendments rather whimsically entitled on my selection sheet "Mr. Carr's Amendments". I should like to group Amendment No. 81 with sub-amendments (a) and (b), which tide together, and Amendment No. 82 with sub-amendments (c) and (d), which ride together.
Amendment No. 81 would extend from one year to two the period of transitional relief for interest on overdrafts and similar arrangements. While the concession have just announced does not exactly parallel that proposal, I hope the Opposition will agree that the net effect is rather more satisfactory to their purpose, and that they will accept the Government amendments in substitution for theirs in that group.

Mr. Higgins: I am sorry to intervene again, but the points being made are very technical, and I am limited in the number of times on which I can intervene to clarify them. The hon. Gentleman suggests that his amendment covers the points we make in our groups of amendments.

Dr. Gilbert: Not entirely.

Mr. Higgins: If it does not cover them entirely, there is still a case for pressing our amendments. Can the hon. Gentleman spell out in what respects the Government amendment does not cover our amendments?

Dr. Gilbert: The effect is to give greater transitional relief beyond one year to six years for non-qualifying expenditure. What we are not giving is an option beyond one year for the period within which one can convert a loan into an overdraft for qualifying purposes. The relief will run for six years if one converts within 12 months under our proposals, which I hope the Opposition will accept as a not ungenerous concession to make at this stage.

Mr. Higgins: Am I right in saying that one has to convert if it is an overdraft


for a non-qualifying purpose? I understand that under the Government's proposals, unlike our amendment, relief will not be given for the overdraft up to the highest minimum balance on the due date for the next year. If I have not made that clear, perhaps I may put it in this way. Am I right in thinking that under the hon. Gentleman's proposals relief for someone who simply has a non-qualifying overdraft on Budget Day will cease on the date originally proposed by the Chancellor if it is not converted? If that is so, the Government amendments do not fully cover the point of our amendment. No doubt if the hon. Gentleman covers our amendment as well the entire spectrum will be covered.

Dr. Gilbert: The hon. Gentleman has understood the situation correctly. We are not proposing an additional transitional period with respect to the conversion facility: we think one year to be a perfectly reasonable period within which someone can convert an overdraft to a loan form of borrowing.
What we are saying is that when the conversion is taking place, regardless of the purposes for which the money was borrowed in the first place, relief shall be available for a six-year period. I hope that the hon. Gentleman will accept that as a not ungenerous concession by the Government.
Now I turn to the Opposition Amendments Nos. 82 and (c) and (d), which have the effect of extending by a further four years a different form of transitional relief, namely, the period allowed under the Bill for interest on loans other than overdrafts and so on which were taken out before Budget Day, and which would not otherwise be eligible for relief under the new rule as having been spent for a qualifying purpose. In our view a 10-year transitional period is unnecessarily generous.
We have, as Members who were present during the Standing Committee will recall, followed a period of six years on the same principle as was followed in 1969 when interest relief was withdrawn at that time by the then Chancellor of the Exchequer, my right hon. Friend the present Home Secretary. I do not seek to detain the House by arguing the point at great length. I am sure that hon.

Gentlemen will agree that it is merely an exercise in line-drawing. One reasonable man can disagree with another about where to draw the line. In our view six years is a perfectly reasonable and generous period, while 10 years goes too far.
Amendments Nos. 13 and 14 honour an undertaking which I gave in Standing Committe to my hon. Friend the Member for Newton (Mr. Evans). He moved Amendment No. 278 which was designed to widen the situation in which a loan made after Budget Day for house purchase or improvement was treated as having been made before that date, thus attracting the benefit of the transitional relief. As drafted subsection (6) of Clause 15 required the taxpayer to provide firm evidence that he had committed himself contractually to the expenditure in question and that he had done so on a firm basis of an offer from the lender to provide money. The amendment in Standing Committe sought to relax this condition by allowing the evidence to take the form of a memorandum or note that an offer had been made by the lender. Our amendment closely follows the wording of my hon. Friend's amendment. Unfortunately it has had to be rather longer—that is often the nature of these things. It makes clear that where evidence of an offer of loan takes this alternative form, the note or memorandum must be one made by the lender—this is the important point—not by the borrower, and must be before Budget Day. I hope that the House accepts that this meets the intention of the amendment put forward by my hon. Friend and that our drafting is reasonable.
The sole purpose of Amendment No. 23 is for clarification. Where someone has borrowed money on overdraft on or before Budget Day for purchase or improvement of land or property within the new qualifying rules the amendment makes clear that if the overdraft is converted to another form of loan before 6th April 1975 interest on the new loan will be eligible for relief as if it were incurred for qualifying purposes. Even without this amendment the Bill could be interpreted as allowing relief in the circumstances, but the amendment makes the position doubly clear.
Amendment No. 33 has the same basic purpose as Amendment No. 23. It


removes any doubt that a loan taken out to repay an overdraft used by executors to pay estate duty before probate, is eligible for relief provided the overdraft is repaid before 6th April 1975.
Amendment No. 34 has the same intention with respect to a loan taken out to repay an overdraft used to acquire an interest in a partnership.
Similarly, Amendment No. 35 removes doubt that a loan taken out to repay an overdraft used to acquire interest in a close company will qualify on the same terms.
Amendments Nos. 36 and 37 are consequential on earlier Government amendments affecting the form of the transitional relief for interest on overdrafts and loans which replace them. The amendments adapt the information required for bank and other certificates of interest paid to the new requirements for relief.
The amendments are self-explanatory, but if any hon. Gentlemen prefer me to go into detail I should be happy to do so, I apologise for speaking at such length, but I have had to deal with a number of amendments in one group and I hope I have given the House sufficient information.

Question, That the words proposed to be left out stand part of the Bill, put and negatived.

Question proposed, That the proposed words be there inserted in the Bill.

Mr. Higgins: I beg to move as an amendment to the proposed amendment, in subsection (4)(a), leave out '1975' and insert '1976'.

Mr. Speaker: With this we can discuss Amendments (b) and (c) and (d).

Mr. Higgins: The House will be grateful to the Financial Secretary for his explanation. We appreciate that it was necessarily lengthy because these are technical matters. What we have sought to do in debating these amendments in Committee and again this evening is to ensure that the basic framework relating to the allowance or disallowance of interest for income tax purposes is as sensible as it can be made.
We are also anxious that the transitional arrangements should be such that hardship is not incurred by any individual or group. We may reasonbly claim that

as a result of our debates in Committee we have made reasonable progress. I thank the Financial Secretary for the undertakings which he then gave and the extent to which these amendments to which he has been speaking fulfil those undertakings.
There are two outstanding matters which I ought to press upon him and to which our amendments are directed. Essentially it is a question of the transitional arrangements. There are two points. The first concerns how long interest should be allowed on an overdraft which is not for a qualifying purpose. The second point relates to the question of for how long arrangements should be allowed to continue with the allowance of interest for income tax purposes on loans which are not for a qualifying purpose.
In the first category the Government originally suggested that overdrafts should qualify only until 6th April 1975. That is the date which still appears in the Government's amendment. Similarly, for the second category the original date was 1980. In both respects we do not believe that the time limit allowed for adjustment is sufficient. I will not weary the House with the reasons which we put forward in Committee in detail.
On the first point our feeling is that if someone has an overdraft at Budget Day which is not for a qualifying purpose then to say that he should not be allowed interest beyond a year from that date is to allow inadequate time. We therefore suggest that a further year should be allowed.
Similarly with loans, we suggest that, because many of these are not infrequently backed up by insurance policies running for a set period of years, 10, 15 or 20, an extension of the date from 1980 to 1984 would be appropriate. I understand, with regard to the overdraft point, that provided a person converts that overdraft into a loan the position will be covered for the longer of the two periods; that is until 1980.
None the less, it means that the overdraft for the non-qualifying period has to be converted. That seems to raise certain difficulties. There may be problems in converting. It may not be possible to operate at such a low rate on a loan as on an overdraft. Therefore,


although we are grateful for the concession that the Financial Secretary has made, we still feel that with the simple overdraft it is not going too far—because this is essentially a transitional problem and the cost cannot be very great—to say that the period ought to be two years rather than one.
I suggest that if the Financial Secretary is not prepared to accept this we should press the amendment to a Division. There is a problem with the longer-term loan. We think it would be right to have a reasonably generous limit—1984 rather than 1980. I hope that the Financial Secretary can oblige. If not I must advise my hon. and right hon. Friends to press that matter to a Division.

10.30 p.m.

Dr. Gilbert: I have listened to the hon. Member for Worthing (Mr. Higgins). I recognise the time difficulties under which he is labouring, as I am. This is an exchange of assertions rather than reasoned argument. The hon. Gentleman thinks that a one-year limit for a conversion and a six-year limit for non-qualifying loans is not adequate. We think that those periods are adequate and generous. There is a clear division of opinion which will have to be put to the vote. I must advise my hon. Friends to resist the amendment.

Question put, That the amendment to the proposed amendment be made:—

The House divided: Ayes 270, Noes 289.

Division No. 89.]
AYES
[10.31 p.m.


Adley, Robert
Crowder, F. P.
Hannam, John


Aitken, Jonathan
Davies, Rt. John (Knutsford)
Harrison, Col. Sir Harwood (Eye)


Alison, Michael (Barkston Ash)
d' Avigdor-GoIdsmid, Maj. -Gen. James
Harvie Anderson, Rt. Hn. Miss


Allason, James (Hemel Hempstead)
Dean, Paul (Somerset, N.)
Hastings, Stephen


Ancram, M.
Deedes, Rt. Hn. W. F.
Havers, Sir Michael


Archer, Jeffrey
Dixon, Piers
Hawkins, Paul


Atkins, Rt. Hn. Humphrey (Spelthorne)
Dodds-Parker, Sir Douglas
Hayhoe, Barney


Awdry, Daniel
Dodsworth, Geoffrey
Henderson, J. S.B.(Dunbartonshire, E)


Baker, Kenneth
Drayson, Burnaby
Heseltine, Michael


Balniel, Rt. Hn. Lord
du Cann, Rt. Hn. Edward
Higgins, Terence


Banks, Robert
Durant, Tony
Holland, Philip


Bell, Ronald
Dykes, Hugh
Hordern, Peter


Bennett, Sir Frederic (Torbay)
Eden, Rt. Hn. Sir John
Howe, Rt. Hn. Sir Geoffrey (Surrey, E.)


Bennett, Dr. Reginald (Fareham)
Edwards, Nicholas (Pembroke)
Howell, David (Guildford)


Benyon, W.
Elliott, Sir William
Howell, Ralph (Norfolk, North)


Biffen, John
Emery, Peter
Hunt, John


Biggs-Davison, John
Eyre, Reginald
Hurd, Douglas


Blaker, Peter
Fairgrieve, Russell
Hutchison, Michael Clark


Boardman, Tom (Leicester, S.)
Farr, John
Iremonger, T. L.


Body, Richard
Fell, Anthony
Irvine, Bryant Godman (Rye)


Boscawen, Hon. Robert
Fenner, Mrs. Peggy
James, David


Bowden, Andrew (Brighton, Kemptown)
Fidler, Michael
Jenkin, Rt. Hn. P. (R'dge W'std &amp; W'fd)


Boyson, Dr. Rhodes (Brent, N.)
Finsberg, Geoffrey
Jessel, Toby


Braine, Sir Bernard
Fisher, Sir Nigel
Johnson Smith, G. (E. Grinstead)


Bray, Ronald
Fletcher, Alexander (Edinburgh, N.)
Jones, Arthur (Daventry)


Brittan, John
Fletcher-Cooke, Charles
Jopling, Michael


Brocklebank-Fowler, Christopher
Fookes, Miss Janet
Joseph, Rt. Hn. Sir Keith


Brown, Sir Edward (Bath)
Fowler, Norman (Sutton C'field)
Kaberry, Sir Donald


Bruce-Gardyne, J.
Fox, Marcus
Kellett-Bowman, Mrs. Elaine


Bryan, Sir Paul
Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)
Kershaw, Anthony


Buchanan-Smith, Alick
Fry, Peter
Kilfedder, James A.


Buck, Antony
Galbraith, Hn. T. G. D.
Kimball, Marcus


Budgen, Nick
Gardiner, George (Reigate &amp; Banstead)
King, Evelyn (Dorset, S.)


Bulmer, Esmond
Gardner, Edward (S. Fylde)
King, Tom (Bridgwater)


Burden, F. A.
Gibson-Watt, Rt. Hn. David
Kirk, Peter


Butler, Adam (Bosworth)
Gilmour, Sir John (Fife, E.)
Kitson, Sir Timothy


Carlisle, Mark
Glyn, Dr. Alan
Knight, Mrs. Jill


Carr, Rt. Hn. Robert
Goodhart, Philip
Knox, David


Carson, John
Goodhew, Victor
Lemont, Norman


Chalker, Mrs. Lynda
Goodlad, A.
Lane, David


Chataway, Rt. Hn. Christopher
Gorst, John
Latham, Michael (Melton)


Churchill, W. S.
Gow, Ian (Eastbourne)
Lawrence, Ivan


Clark, William (Croydon, S.)
Gower, Sir Raymond (Barry)
Lawson, Nigel (Blaby)


Clarke, Kenneth (Rushcliffe)
Grant, Anthony (Harrow, C.)
Lester, Jim (Beeston)


Clegg, Walter
Gray, Hamish
Lewis, Kenneth (Rtland &amp; Stmford)


Cockcroft, John
Grieve, Percy
Lloyd, Ian (Havant &amp; Waterloo)


Cooke, Robert (Bristol, W.)
Griffiths, Eldon (Bury St. Edmunds)
Loveridge, John


Cope, John
Grist, Ian
Luce, Richard


Cordle, John
Grylls, Michael
McAdden, Sir Stephen


Cormack, Patrick
Gurden, Harold
MacArthur, Ian


Corrie, John
Hall, Sir John
McCrindle, R. A.


Costain, A. P.
Hall-Davis, A. G. F.
McCusker, H.


Critchley, Julian
Hamilton, Michael (Salisbury)
Macfarlane, Neil


Crouch, David
Hampson, Dr. Keith
MacGregor, John




McLaren, Martin
Pattle, Geoffrey
Stainton, Keith


Macmillan, Rt. Hn. M. (Farnham)
Percival, Ian
Stanbrook, Ivor


McNair-Wilson, Michael (Newbury)
Peyton, Rt. Hn. John
Stanley, John


McNair-Wilson, Patrick (New Forest)
Pink, R. Bonner
Stewart, Ian (Hitchin)


Madel, David
Price, David (Eastleigh)
Stodart, Rt. Hn. A. (Edinburgh, W.)


Marshall, Michael (Arundel)
Prior, Rt. Hn. James
Stokes, John


Mather, Carol
Raison, Timothy
Stradling Thomas, John


Maude, Angus
Rawlinson, Rt. Hn. Sir Peter
Tapsell, Peter


Mawby, Ray
Redmond, Robert
Taylor, Edward M. (Glgow, C'cart)


Maxwell-Hyslop, R. J.
Rees, Peter (Dover &amp; Deal)
Taylor, Robert (Croydon, N.W.)


Mayhew, Patrick (Royal T' bridge Wells)
Pees-Davies, W. R.
Tebbit, Norman


Meyer, Sir Anthony
Renton, R. T. (Mid-Sussex)
Temple-Morris, Peter


Miller, Hal (B'grove &amp; R'ditch)
Rhys Williams, Sir Brandon
Thatcher, Rt. Hn. Margaret


Mills, Peter
Ridsdale, Julian
Thomas, Rt. Hn. P. (B'net, H'den S.)


Miscampbell, Norman
Rifkind, Malcolm
Townsend, C. D.


Mitchell, David (Basingstoke)
Rippon, Rt. Hn. Geoffrey
Trotter, Neville


Moate, Roger
Roberts, Michael (Cardiff, N.-W.)
Tugendhat, Christopher


Molyneaux, James
Roberts, Wyn (Conway)
Vaughan, Dr. Gerard


Monro, Hector
Rodgers, Sir John (Sevenoaks)
Viggers, Peter


Moore, J. E. M. (Croydon, C.)
Rossi, Hugh (Hornsey)
Waddington, David


Morgan, Geraint
Rost, Peter (Derbyshire, S.-E.)
Wakeham, John


Morgan-Giles, Rear-Adm.
Royle, Sir Anthony
Walder, David (Clitheroe)


Morris, Mitchell (Northampton, S.)
Sainsbury, Tim
Walker-Smith, Rt. Hn. Sir Derek


Morrison, Charles (Devizes)
Scott-Hopkins, James
Wall, Patrick


Morrison, Peter (City of Chester)
Shaw, Giles (Pudsey)
Walters, Dennis


Mudd, David
Shaw, Michael (Scarborough)
Warren, Kenneth


Neave, Airey
Shelton, William (L'mb'th, Streath'm)
Weatherill, Bernard


Neubert, Michael
Shersby, Michael
Wells, John


Newton, Tony (Braintree)
Silvester, Fred
Wiggin, Jerry


Nicholls, Sir Harmar
Sims, Roger
Winterton, Nicholas


Normanton, Tom
Sinclair, Sir George
Wood, Rt. Hn. Richard


Nott, John
Skeet, T. H. H.
Worsley, Sir Marcus


Onslow, Cranley
Smith, Dudley (W'wick &amp; L'mington)
Young, Sir George (Ealing, Acton)


Orr, Capt. L. P. S.
Spence, John



Osborn, John
Spicer, Jim (Dorset, W.)
TELLERS FOR THE AYES:


Page, Rt. Hn. Graham (Crosby)
Spicer, Michael (Worcestershire, S.)
Mr. Spencer Le Marchant and


Page, John (Harrow, W.)
Sproat, Iain
Mr. Cecil Parkinson.




NOES


Abse, Leo
Crosland, Rt. Hn. Anthony
Freud, Clement


Allaun, Frank
Cryer, G. R.
Galpern, Sir Myer


Armstrong, Ernest
Cunningham, G.(Isl'ngt'n, S &amp; F'sb'ry)
Garrett, John (Norwich, S.)


Ashton, Joe
Cunningham, Dr. John A. (Whiteh 'v' n)
Garrett, W. E. (Wallsend)


Atkins, Ronald
Davidson, Arthur
George, Bruce


Atkinson, Norman
Davies, Bryan (Enfield, N.)
Gilbert, Dr. John


Bagier, Gordon, A. T.
Davies, Denzil (Llanelli)
Ginsburg, David


Barnett, Joel (Heywood &amp; Royton)
Davies, Ifor (Gower)
Gourlay, Harry


Bates, Alf
Davis, Clinton (Hackney, C.)
Graham, Ted


Baxter, William
Deakins, Eric
Grant, George (Morpeth)


Beith, A. J.
Dean, Joseph (Leeds, W.)
Grant, John (Islington, C.)


Benn, Rt. Hn. Anthony Wedgwood
de Freitas, Rt. Hn. Sir Geoffrey
Griffiths, Eddie (Sheffield, Brightside)


Bennett, Andrew F. (Stockport, N.)
Delargy, Hugh
Grimond, Rt. Hn. J.


Bidwell, Sydney
Dell, Rt. Hn. Edmund
Hamilton, James (Bothwell)


Bishop, E. S.
Dempsey, James
Hamilton, William (Fife, C.)


Blenkinsop, Arthur
Doig, Peter
Hamling, William


Boardman, H.
Dormand, J. D.
Hardy, Peter


Booth, Albert
Douglas-Mann, Bruce
Harper, Joseph


Boothroyd, Miss Betty
Duffy, A. E. P.
Harrison, Walter (Wakefield)


Bottomley, Rt. Hon. Arthur
Dunn, James A.
Hart, Rt. Hn. Judith


Boyden, James (Bishop Auckland)
Dunnett, Jack
Hatton, Frank


Bradley, Tom
Dunwoody, Mrs. Gwyneth
Healey, Rt. Hn. Denis


Broughton, Sir Alfred
Eadie, Alex
Heffer, Eric S.


Brown, Bob (Newcastle upon Tyne, W.)
Edelman, Maurice
Hooley, Frank


Brown, Hugh D. (Glasgow, Provan)
Edge, Geoff
Hooson, Emlyn


Brown, Ronald (H'kney, S. &amp; Sh'ditch)
Edwards, Robert (W'hampton, S.E.)
Horam, John


Buchan, Norman
Ellis, John (Brigg &amp; Scunthorpe)
Howell, Denis (B'ham, Small Health)


Butler, Mrs. Joyce (H'gey, WoodGreen)
Ellis, Tom (Wrexham)
Howells, Geraint (Cardigan)


Callaghan, Jim (M'dd'ton &amp; Pr'wch)
English, Michael
Huckfield, Leslie


Campbell, Ian
Ennals, David
Hughes, Rt. Hn. Cledwyn (Anglesey)


Cant, R. B.
Evans, Fred (Caerphilly)
Hughes, Mark (Durham)


Carmichael, Neil
Evans, Ioan (Aberdare)
Hughes, Robert (Aberdeen, North)


Carter, Ray
Evans, John (Newton)
Hughes, Roy (Newport)


Carter-Jones, Lewis
Ewing, Harry (St'ling, F'kirk &amp; G'm'th)
Hunter, Adam


Castle, Rt. Hn. Barbara
Fernyhough, Rt. Hn. E.
Irvine, Rt. Hn. Sir A. (L'p'I, EdgeHI)


Clemitson, Ivor
Fitch, Alan (Wigan)
Irving, Rt. Hn. Sydney (Dartford)


Cocks, Michael
Flannery, Martin
Jackson, Colin


Cohen, Stanley
Fletcher, Raymond (Ilkeston)
Janner, Greville


Coleman, Donald
Fletcher, Ted (Darlington)
Jay, Rt. Hn. Douglas


Colquhoun, Mrs. M. N.
Foot, Rt. Hn. Michael
Jeger, Mrs. Lena


Conlan, Bernard
Ford, Ben
Jenkins, Rt. Hn. Roy (B'ham, St'fd)


Cook, Robert F. (Edinburgh, C.)
Forrester, John
John, Brynmor


Cox, Thomas
Fowler, Gerry (The Wrekin)
Johnson, James (K'ston upon Hull, W)


Craigen, J. M. (G'gow, Maryhill)
Fraser, John (Lambeth, Norwood)
Johnson, Walter (Derby, S.)


Cronin, John
Freeson, Reginald
Johnston, Russell (Inverness)




Jones, Barry (Flint, E.)
Newens, Stanley (Harlow)
Spearing, Nigel


Jones, Dan (Burnley)
Oakes, Gordon
Spriggs, Leslie


Jones, Gwynoro (Carmarthen)
Ogden, Eric
Stallard, A. W.


Jones, Alec (Rhondda)
O'Halloran, Michael
Steel, David


Judd, Frank
O'Malley, Brian
Stewart, Rt. Hn. M. (H'eth, Fulh'm)


Kaufman, Gerald
Orbach, Maurice
Stoddart, David (Swindon)


Kelley, Richard
Ovenden, John
Stonehouse, Rt. Hn. John


Kerr, Russell
Owen, Dr. David
Stott, Roger


Kilroy-Silk, Robert
Padley, Walter
Strang, Gavin


Kinnock, Neil
Palmer, Arthur
Strauss, Rt. Hn. G. R.


Lambie, David
Pardoe, John
Summerskill, Rt. Hn. Shirley


Lamborn, Harry
Park, George (Coventry, N.E.)
Swain, Thomas


Lamond, James
Parker, John (Dagenham)
Taverne, Dick


Lawson, George (Motherwell &amp; Wishaw)
Parry, Robert
Thomas, Jeffrey (Abertillery)


Leadbitter, Ted
Pavitt, Laurie
Thorne, Stan (Preston, S.)


Lee, John
Peart, Rt. Hn. Fred
Thorpe, Rt. Hn. Jeremy


Lestor, Miss Joan (Eton &amp; Slough)
Perry, Ernest G.
Tierney, Sydney


Lewis, Arthur (Newham, N.)
Phipps, Dr. Colin
Tinn, James


Lewis, Ron (Carlisle)
Prentice, Rt. Hn. Reg.
Tomlinson, John


Lipton, Marcus
Prescott, John
Tomney, Frank


Loughlin, Charles
Price, Christopher (Lewisham, W.)
Torney, Tom


Loyden, Eddie
Price, William (Rugby)
Tuck, Raphael


Lyons, Edward (Bradford, W.)
Radice, Giles
Tyler, Paul


Mabon, Dr. J. Dickson
Rees, Rt. Hn. Merlyn (Leeds, S.)
Urwin, T. W.


McCartney, Hugh
Reid, George
Varley, Rt. Hn. Eric G.


McElhone, Frank
Richardson, Miss Jo
Wainwright, Edwin (Dearne Valley)


MacFarquhar, Roderick
Roberts, Albert (Normanton)
Wainwright, Richard (Colne Valley)


McGuire, Michael
Roberts, Gwilym (Cannock)
Walker, Harold (Doncaster)


Mackenzie, Gregor
Robertson, John (Paisley)
Walker, Terry (Kingswood)


Maclennan, Robert
Roderick, Caerwyn E.
Watt, Hamish


McMillan, Tom (Glasgow, C.)
Rodgers, George (Chorley)
Weitzman, David


McNamara, Kevin
Rodgers, William (Teesside, St'ckton)
Wellbeloved, James


Madden, M. O. F.
Rooker, J. W.
White, James


Magee, Bryan
Roper, John
Whitehead, Phillip


Mahon, Simon
Rose, Paul B.
Whitlock, William


Mallalieu, J. P. W.
Ross, Stephen (Isle of Wight)
Willey, Rt. Hn. Frederick


Marks, Kenneth
Ross, Rt. Hn. William (Kilmarnock)
Williams, Alan (Swansea, W.)


Marquand, David
Rowlands, Edward
Williams, Alan Lee (Hvrng, Hchurch)


Marshall, Dr. Edmund (Goole)
Sandelson, Neville
Williams, Rt. Hn. Shirley(H 'f' d &amp; St'ge)


Mayhew, Christopher (G'wh, W'wch, E)
Sedgemore. Bryan
Williams, W. T. (Warrington)


Meacher, Michael
Selby, Harry
Wilson, Alexander (Hamilton)


Mellish, Rt. Hn. Robert
Shaw, Arnold (Redbridge, Ilford, S.)
Wilson, William (Coventry, S.E.)


Mikardo, Ian
Sheldon, Robert (Ashton-under-Lyne)
Winstanley, Dr. Michael


Millan, Bruce
Shore, Rt. Hn. Peter(S'pney &amp; P'plar)
Wise, Mrs. Audrey


Miller, Dr. M. S. (E. Kilbride)
Short, Rt. Hn. E. (N'ctle-U-Tyne)
Woodall, Alec


Milne, Edward
Short, Mrs. Renee (W'hamp'n, N.E.)
Woof, Robert


Mitchell, R. C. (S'hampton, Itchen)
Sillars, James
Wrigglesworth, Ian


Molloy, William
Silverman, Julius
Young, David (Bolton, E.)


Morris, Alfred (Wythenshawe)
Skinner, Dennis



Morris, Charles R. (Openshaw)
Small, William
TELLERS FOR THE NOES:


Morris, Rt. Hn. John (Aberavon)
Smith, Cyril (Rochdale)
Mr. John Golding and


Moyle, Roland
Smith, John (Lanarkshire, N.)
Mr. Tom Pendry.


Mulley, Rt. Hn. Frederick
Snape, Peter

Question accordingly negatived.

Amendment proposed to the proposed amendment: Amendment (c), in subsection (4)(b), line 10, leave out '1980' and insert '1984'.—[Mr. Higgins.]

Question put, That the amendment to the proposed amendment be made:—

The House divided: Ayes 273, Noes 289.

Division No. 90.]
AYES
[10.44 p.m.


Adley, Robert
Body, Richard
Carson, John


Aitken, Jonathan
Boscawen, Hon. Robert
Chalker, Mrs. Lynda


Alison, Michael (Barkston Ash)
Bowden, Andrew (Brighton, Kemptown)
Chataway, Rt. Hn. Christopher


Allason, James (Hemel Hempstead)
Boyson, Dr. Rhodes (Brent, N.)
Churchill, W. S.


Ancram, M.
Braine, Sir Bernard
Clark, A. K. M. (Plymouth, Sutton)


Archer, Jeffrey
Bray, Ronald
Clark, William (Croydon, S.)


Atkins, Rt. Hn. Humphrey (Spelthorne)
Brittan, Leon
Clarke, Kenneth (Rushcliffe)


Awdry, Daniel
Brocklebank-Fowler, Christopher
Clegg, Walter


Baker, Kenneth
Brown, Sir Edward (Bath)
Cockcroft, John


Balniel, Rt. Hn. Lord
Bruce-Gardyne, J.
Cooke, Robert (Bristol, W.)


Banks, Robert
Bryan, Sir Paul
Cope, John


Bell, Ronald
Buchanan-Smith, Alick
Cordle, John


Bennett, Sir Frederic (Torbay)
Buck, Antony
Cormack, Patrick


Bennett, Dr. Reginald (Fareham)
Budgen, Nick
Corrie, John


Benyon, W.
Bulmer, Esmond
Costain, A. P.


Biffen, John
Burden, F. A.
Critchley, Julian


Biggs-Davison, John
Butler, Adam (Bosworth)
Crouch, David


Blaker, Peter
Carlisle, Mark
Crowder, F. P.


Boardman, Tom (Leicester, S.)
Carr, Rt. Hn. Robert
Davies, Rt. Hn. John (Knutsford)




d'Avigdor-Goldsmid, Maj.-Gen. James
Johnson Smith, G. (E. Grinstead)
Price, David (Eastleigh)


Dean, Paul (Somerset, N.)
Jones, Arthur (Daventry)
Prior, Rt. Hn. James


Deedes, Rt. Hn. W. F.
Jopling, Michael
Raison, Timothy


Dixon, Piers
Joseph, Rt. Hn. Sir Keith
Rathbone, Tim


Dodds-Parker, Sir Douglas
Kaberry, Sir Donald
Rawlinson, Rt. Hn. Sir Peter


Dodsworth, Geoffrey
Kellett-Bowman, Mrs. Elaine
Redmond, Robert


Drayson, Burnaby
Kershaw, Anthony
Rees, Peter (Dover &amp; Deal)


du Cann, Rt. Hn. Edward
Kilfedder, James A.
Rees-Davies, W. R,


Durant, Tony
Kimball, Marcus
Renton, R. T. (Mid-Sussex)


Dykes, Hugh
King, Evelyn (Dorset, S.)
Rhys Williams, Sir Brandon


Eden, Rt. Hn. Sir John
King, Tom (Bridgwater)
Ridley, Hn. Nicholas


Edwards, Nicholas (Pembroke)
Kirk, Peter
Ridsdale, Julian


Elliott, Sir William
Kitson, Sir Timothy
Rifkind, Malcolm


Emery, Peter
Knight, Mrs. Jill
Rippon, Rt. Hn. Geoffrey


Eyre, Reginald
Knox, David
Roberts, Michael (Cardiff, N.-W.)


Fairgrieve, Russell
Lamont, Norman
Roberts, Wyn (Conway)


Farr, John
Lane, David
Rodgers, Sir John (Sevenoaks)


Fell, Anthony
Latham, Michael (Melton)
Rossi, Hugh (Hornsey)


Fenner, Mrs. Peggy
Lawrence, Ivan
Rost, Peter (Derbyshire, S.-E.)


Fidler, Michael
Lawson, Nigel (Blaby)
Royle, Sir Anthony


Finsberg, Geoffrey
Lester, Jim (Beeston)
Sainsbury, Tim


Fisher, Sir Nigel
Lewis, Kenneth (Rtland &amp; Stmford)
Scott-Hopkins, James


Fletcher, Alexander (Edinburgh, N.)
Lloyd, Ian (Havant &amp; Waterloo)
Shaw, Giles (Pudsey)


Fletcher-Cooke, Charles
Loveridge, John
Shaw, Michael (Scarborough)


Fookes, Miss Janet
Luce, Richard
Shelton, Willam (L'mb'th, Streath'm)


Fowler, Norman (Sutton C'field)
McAdden, Sir Stephen
Shersby, Michael


Fox, Marcus
MacArthur, Ian
Silvester, Fred


Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)
McCrindle, R. A.
Sims, Roger


Fry, Peter
McCusker, H.
Sinclair, Sir George


Galbraith, Hn. T. G. D.
Macfarlane, Neil
Skeet, T. H. H.


Gardiner, George (Reigate &amp; Banstead)
MacGregor, John
Smith, Dudley (W'wick &amp; L'mington)


Gardner, Edward (S. Fylde)
McLaren, Martin
Spence, John


Gibson-Watt, Rt. Hn. David
Macmillan, Rt. Hn. M. (Farnham)
Spicer, Jim (Dorset, W.)


Gilmour, Sir John (Fife, E.)
McNair-Wilson, Michael (Newbury)
Spicer, Michael (Worcestershire, S.)


Glyn, Dr. Alan
McNair-Wilson, Patrick (New Forest)
Sproat, Iain


Goodhart, Philip
Madel, David
Stainton, Keith


Goodhew, Victor
Marshall, Michael (Arundel)
Stanbrook, Ivor


Goodlad, A.
Mather, Carol
Stanley, John


Gorst, John
Maude, Angus
Stewart, Ian (Hitchin)


Gow, Ian (Eastbourne)
Maudling, Rt. Hn. Reginald
Stodart, Rt. Hn. A. (Edinburgh, W.)


Gower, Sir Raymond (Barry)
Mawby, Ray
Stokes, John


Grant, Anthony (Harrow, C.)
Maxwell-Hyslop, R. J.
Stradling Thomas, John


Gray, Hamish
Mayhew, Patrick (Royal T' bridge Wells)
Tapsell, Peter


Grieve, Percy
Meyer, Sir Anthony
Taylor, Edward M. (Glgow, C'cart)


Griffiths, Eldon (Bury St. Edmunds)
Miller, Hal (B'grove &amp; R'ditch)
Taylor, Robert (Croydon, N.W.)


Grist, Ian
Mills, Peter
Tebbit, Norman


Grylls, Michael
Miscampbell, Norman
Temple-Morris, Pete;


Gurden, Harold
Mitchell, David (Basingstoke)
Thatcher, Rt. Hn. Margaret


Hall, Sir John
Moate, Roger
Thomas, Rt. Hn. P. (B'net, H'den S.)


Hamilton, Michael (Salisbury)
Molyneaux, James
Townsend, C. D.


Hampson, Dr. Keith
Monro, Hector
Trotter, Neville


Hannam, John
Moore, J. E. M. (Croydon, C.)
Tugendhat, Christopher


Harrison, Col. Sir Harwood (Eye)
Morgan, Geraint
Vaughan, Dr. Gerard


Harvie Anderson, Rt. Hn. Miss
Morgan-Giles, Rear-Adm.
Viggers, Peter


Hastings, Stephen
Morris, Michael (Northampton, S.)
Waddington, David


Havers, Sir Michael
Morrison, Charles (Devizes)
Wakeham, John


Hawkins, Paul
Morrison, Peter (City of Chester)
Walder, David (Clitheroe)


Hayhoe, Barney
Mudd, David
Walker-Smith, Rt. Hn. Sir Derek


Henderson, J.S.B. (Dunbartonshire, E.)
Neave, Airey
Wall, Patrick


Heseltine, Michael
Neubert, Michael
Walters, Dennis


Higgins, Terence
Newton, Tony (Braintree)
Warren, Kenneth


Holland, Philip
Nicholls, Sir Harmar
Weatherill, Bernard


Hordern, Peter
Normanton, Tom
Wells, John


Howe, Rt. Hn. Sir Geoffrey (Surrey, E.)
Nott, John
Wiggin, Jerry


Howell, David (Guildford)
Onslow, Cranley
Winterton, Nicholas


Howell, Ralph (Norfolk, North)
Orr, Capt. L. P. S.
Wood, Rt. Hn. Richard


Hunt, John
Osborn, John
Worsley, Sir Marcus


Hurd, Douglas
Page, Rt. Hn. Graham (Crosby)
Young, Sir George (Ealing, Acton)


Hutchison, Michael Clark
Page, John (Harrow, W.)



[...]emonger, T. L.
Parkinson, Cecil (Hertfordshire, S.)
TELLERS FOR THE AYES:


Irvine, Bryant Godman (Rye)
Pattle, Geoffrey
Mr. Spencer Le Marchant and


James, David
Percival, Ian
Mr. A. G. F. Hall-Davis.


Jenkin, Rt. Hn. P. (R'dge W'std &amp; W'fd)
Peyton, Rt. Hn. John



Jessel, Toby
Pink, R. Bonner





NOES


Abse, Leo
Bates, Alf
Boardman, H. (Leigh)


Allaun, Frank
Baxter, William
Booth, Albert


Armstrong, Ernest
Beith, A. J.
Boothroyd, Miss Betty


Ashton, Joe
Benn, Rt. Hn. Anthony Wedgwood
Bottomley, Rt. Hon. Arthur


Atkins, Ronald
Bennett, Andrew F. (Stockport, N.)
Boyden, James (Bishop Auckland)


Atkinson, Norman
Bidwell, Sydney
Bradley, Tom


Bagier, Gordon, A. T.
Bishop, E. S.
Broughton, Sir Alfred


Barnett, Joel (Heywood &amp; Royton)
Blenkinsop, Arthur
Brown, Bob (Newcastle upon Tyne, W.)




Brown, Hugh D. (Glasgow, Provan)
Hart, Rt. Hn. Judith
Ovenden, John


Brown, Ronald (H'gey, S. &amp; Sh'ditch)
Hatton, Frank
Owen, Dr. David


Buchan, Norman
Healey, Rt. Hn. Denis
Padley, Walter


Butler, Mrs. Joyce (H'gey, WoodGreen)
Heffer, Eric S.
Palmer, Arthur


Callaghan, Jim (M'dd'ton &amp; Pr'wch)
Hooley, Frank
Pardoe, John


Campbell, Ian
Hooson, Emlyn
Park, George (Coventry, N.E.)


Cant, R. B.
Horam, John
Parker, John (Dagenham)


Carmichael, Neil
Howell, Denis (B'ham, Small Heath)
Parry, Robert


Carter, Ray
Howells, Geraint (Cardigan)
Pavitt, Laurie


Carter-Jones, Lewis
Huckfield, Leslie
Peart, Rt. Hn. Fred


Castle, Rt. Hn. Barbara
Hughes, Rt. Hn. Cledwyn (Anglesey)
Pendry, Tom


Clemitson, Ivor
Hughes, Mark (Durham)
Perry, Ernest G.


Cocks, Michael
Hughes, Robert (Aberdeen, North)
Phipps, Dr. Colin


Cohen, Stanley
Hughes, Roy (Newport)
Prentice, Rt. Hn. Reg.


Coleman, Donald
Hunter, Adam
Prescott, John


Colquhoun, Mrs. M. N.
Irvine, Rt. Hn. Sir A. (L'p'I, EdgeHI)
Price, Christopher (Lewisham, W.)


Conlan, Bernard
Irving, Rt. Hn. Sydney (Dartford)
Price, William (Rugby)


Cook, Robert F. (Edinburgh, C.)
Jackson, Colin
Radice, Giles


Cox, Thomas
Janner, Greville
Rees, Rt. Hn. Merlyn (Leeds, S.)


Craigen, J. M. (G'gow, Maryhill)
Jay, Rt. Hn. Douglas
Reid, George


Cronin, John
Jeger, Mrs. Lena
Richardson, Miss Jo


Crosland, Rt. Hn. Anthony
Jenkins, Rt. Hn. Roy (B'ham, St'fd)
Roberts, Albert (Normanton)


Cryer, G. R.
John, Brynmor
Roberts, Gwilym (Cannock)


Cunningham, G.(Isl'ngt'n, S &amp; F'sb'ry)
Johnson, James (K'ston upon Hull, W)
Robertson, John (Paisley)


Cunningham, Dr. John A. (Whiteh 'v' n)
Johnston, Russell (Inverness)
Roderick, Caerwyn E.


Davidson, Arthur
Jones, Barry (Flint, E.)
Rodgers, George (Chorley)


Davies, Bryan (Enfield, N.)
Jones, Dan (Burnley)
Rodgers, William (Teesside, St'ckton)


Davies, Denzil (Llanelli)
Jones, Gwynoro (Carmarthen)
Rooker, J. W.


Davies, Ifor (Gower)
Jones, Alec (Rhondda)
Roper, John


Davis, Clinton (Hackney, C.)
Judd, Frank
Rose, Paul B.


Deakins, Eric
Kaufman, Gerald
Ross, Stephen (Isle of Wight)


Dean, Joseph (Leeds, W.)
Kelley, Richard
Ross, Rt. Hn. William (Kilmarnock)


de Freitas, Rt. Hn. Sir Geoffrey
Kerr, Russell
Rowlands, Edward


Delargy, Hugh
Kilroy-Silk, Robert
Sandelson, Neville


Dell, Rt. Hn. Edmund
Kinnock, Neil
Sedgemore, Bryan


Dempsey, James
Lambie, David
Selby, Harry


Doig, Peter
Lamborn, Harry
Shaw, Arnold (Redbridge, Ilford, S.)


Dormand, J. D.
Lamond, James
Sheldon, Robert (Ashton-under-Lyne)


Douglas-Mann, Bruce
Lawson, George (Motherwell &amp; Wishaw)
Shore, Rt. Hn. Peter (S'pney &amp; P'plar)


Duffy, A. E. P.
Leadbitter, Ted
Short, Rt. Hn. E. (N'ctle-u-Tyne)


Dunn, James A.
Lee, John
Short, Mrs. Renée (W'hamp'n, N. E.)


Dunnett, Jack
Lestor, Miss Joan (Eton &amp; Slough)
Sillars, James


Dunwoody, Mrs. Gwyneth
Lewis, Arthur (Newham, N.)
Silverman, Julius


Eadie, Alex
Lewis, Ron (Carlisle)
Skinner, Dennis


Edelman, Maurice
Lipton, Marcus
Small, William


Edge, Geoff
Loughlin, Charles
Smith, Cyril (Rochdale)


Edwards. Robert (W'hampton, S.E.)
Loyden, Eddie
Smith, John (Lanarkshire, N.)


Ellis, John (Brigg &amp; Scunthorpe)
Lyons, Edward (Bradford, W.)
Snape, Peter


Ellis, Tom (Wrexham)
Mabon, Dr. J. Dickson
Spearing, Nigel


English, Michael
McCartney, Hugh
Spriggs, Leslie


Ennals, David
McElhone, Frank
Stallard, A. W.


Evans, Fred (Caerphilly)
MacFarquhar, Roderick
Steel, David


Evans, Ioan (Aberdare)
McGuire, Michael
Stewart, Rt. Hn. M. (H'eth, Fulh'm)


Evans, John (Newton)
Mackenzie, Gregor
Stoddart, David (Swindon)


Ewing, Harry (St'ling, F'kirk &amp; G'm'th)
Maclennan, Robert
Stonehouse, Rt. Hn. John


Fernyhough, Rt. Hn. E.
McMillan, Tom (Glasgow, C.)
Stott, Roger


Fitch, Alan (Wigan)
McNamara, Kevin
Strang, Gavin


Flannery, Martin
Madden, M. O. F.
Strauss, Rt. Hn. G. R.


Fletcher, Raymond (Ilkeston)
Magee, Bryan
Summerskill, Rt. Hn. Shirley


Fletcher, Ted (Darlington)
Mahon, Simon
Swain, Thomas


Foot, Rt. Hn. Michael
Mallalieu, J. P. W.
Taverne, Dick


Ford, Ben
Marks, Kenneth
Thomas, Jeffrey (Abertillery)


Forrester, John
Marquand, David
Thorne, Stan (Preston, S.)


Fowler, Gerry (The Wrekin)
Marshall, Dr. Edmund (Goole)
Thorpe, Rt. Hn. Jeremy


Fraser, John (Lambeth, Norwood)
Mayhew, Christopher (G'wh, W'wch, E)
Tierney, Sydney


Freud, Clement
Meacher, Michael
Tinn, James


Galpern, Sir Myer
Mellish, Rt. Hn. Robert
Tomlinson, John


Garrett, John (Norwich, S.)
Mikardo, Ian
Tomney, Frank


Garrett, W. E. (Wallsend)
Millan, Bruce
Torney, Tom


George, Bruce
Miller, Dr. M. S. (E. Kilbride)
Tuck, Raphael


Gilbert, Dr. John
Milne, Edward
Tyler, Paul


Ginsburg, David
Mitchell, R. C. (S'hampton, Itchen)
Urwin, T. W.


Gourlay, Harry
Molloy, William
Varley, Rt. Hn. Eric G.


Graham, Ted
Morris, Alfred (Wythenshawe)
Wainwright, Edwin (Dearne Valley)


Grant, George (Morpeth)
Morris, Charles R. (Openshaw)
Wainwright, Richard (Colne Valley)


Grant, John (Islington, C.)
Morris, Rt. Hn. John (Aberavon)
Walden, Brian (B'm'ham, Ladywood)


Griffiths, Eddie (Sheffield, Brightside)
Moyle, Roland
Walker, Harold (Doncaster)


Grimond, Rt. Hn. J.
Mulley, Rt. Hn. Frederick
Walker, Terry (Kingswood)


Hamilton, James (Bothwell)
Newens, Stanley (Harlow)
Watt, Hamish


Hamilton, William (Fife, C.)
Oakes, Gordon
Weitzman, David


Hamling, William
Ogden, Eric
Wellbeloved, James


Hardy, Peter
O'Halloran, Michael
White, James


Harper, Joseph
O'Malley, Brian
Whitehead, Phillip


Harrison, Walter (Wakefield)
Orbach, Maurice
Whitlock, William







Willey, Rt. Hn. Frederick
Wilson, William (Coventry, S.E.)
Young, David (Bolton, E.)


Williams, Alan (Swansea, W.)
Winstanley, Dr. Michael



Williams, Alan Lee (Hvrng, Hchurch)
Wise, Mrs. Audrey
TELLERS FOR THE NOES


Williams, Rt. Hn. Shirley (H 'f' d &amp; St'ge)
Woodall, Alec
Mr. John Golding and


Williams, W. T. (Warrington)
Woof, Robert
Mr. Walter Johnson.


Wilson, Alexander (Hamilton)
Wrigglesworth, Ian

Question accordingly negatived.

Proposed words there inserted in the Bill.

Mr. Deputy Speaker: Next we come to the Government Amendments Nos. 12, 13, 14 and 15 on page 75, and Amendments Nos. 23 to 37.

Mr. Higgins: I do not understand what is happening. Am I right in thinking that all these are consequential on those debated previously?

Dr. Gilbert: I do not think that Amendment No. 24 is included. That is the subject of a new group.

Mr. Deputy Speaker: I should have stopped at Amendment No. 23.

Amendments made:

No. 12, in page 10, line 16, leave out from 'balance' to end of line 20 and insert
'on 26th March 1974 of the overdrawn account and at the rate at which interest on that balance was chargeable on 26th March 1974 and the limit on the amount interest payable on which is excepted by paragraph (b) of that subsection is that debit balance.
(6) For the purposes of this section—

(a) a debt replaces another if it is incurred for the purpose of discharging that other debt or a debt replacing it; and
(b) a debt incurred by overdrawing an account which had a debit balance on 26th March 1974 shall be treated as incurred on or before that date; and
(c) a debt incurred by debiting the account of a person as the holder of a credit card or under similar arrangements shall be treated as incurred by overdrawing that account and "overdraft" shall be construed accordingly.'

No. 13, in line 28, leave out 'in writing'.

No. 14, in line 29, at end insert
and that the offer either was in writing or was evidenced by a note or memorandum made by the lender on or before that date.'

No. 15, in line 30, leave out 'the obligation to pay the interest' and insert 'the debt on which the interest is payable'.[Dr. Gilbert.]

Schedule 1

RELIEF FOR INTEREST

PART I

Amendments made:

No. 23, in page 42, line 9, at end insert
'and the relief referred to in the words so substituted in paragraph 1(c) of that Schedule shall include any relief by virtue of section 15(4) of this Act'.—[Mr. Gilbert.]

Dr. Gilbert: I beg to move Amendment No. 24, in page 42, line 36, leave out from 'date' to 'or' in line 38.

Mr. Deputy Speaker (Mr. Oscar Murton): With this it will be convenient to take Government Amendments Nos. 25, 26, 27, 29. 30 and 31.

Dr. Gilbert: It might be for the convenience of the House if I group these amendments in four separate groups. Amendments Nos. 24 and 26 are Government amendments. These amendments arise from the need to put into full effect Amendment No. 25 which was moved by the hon. Member for Croydon, South (Mr. Clark) in the Standing Committee. His amendment would have given the Board of Inland Revenue discretion to allow income relief where occupation of a new residence was reasonably delayed for more than 12 months. For reasons I then explained, the amendment did not achieve the effect he sought. This somewhat lengthy reconstruction gives effect to his purpose.
11.0 p.m.
Amendments Nos. 25 and 27 fulfil undertakings I gave in Committee to ease the conditions where relief is claimed on interest on a loan to purchase or improve a property intended for commercial letting. I think that the amendments are clear, but if hon. Members want more detail I shall be happy to give it.
Amendment No. 29 gives the Board of Inland Revenue the same discretion to extend the 12 months period of grace for bridging loans as applies when occupation of a new residence is delayed for


more than 12 months. This too is consequential on our acceptance of the amendment of the hon. Member for Croydon, South in Committee.
Amendments Nos. 30 and 31 honour a further undertaking I gave in Committee. As the Bill stands, paragraph 6 of Schedule 1 allows relief for interest on a loan to purchase or improve a property for letting to be given only against rental income from that property. The amendment widens the provision to give relief on rental income on any other property owned by the borrower. Rather more extensive amendments along these lines were moved in Committee by the hon. Member for Croydon, South and the hon. and learned Member for Dover and Deal (Mr. Rees). I could not go all the way with their suggestion, but the amendments fulfil the commitments I gave then.

Mr. John Page: The Financial Secretary kindly said that he would elucidate further on some of the amendments for the benefit of those who were not on the Standing Committee Could he give the grounds for the extension of the period of grace by Amendment No. 24? A shorthand report might be difficult, but if it is possible it might help.

Dr. Gilbert: I am happy to do so. I hope that the hon. Gentleman did not think me discourteous; I was just trying to save the time of the House.
In normal cases, relief is allowed for the first 12 months following the date of the loan, provided the property in question is being used as his main residence by the borrower by the end of that period. The amendment would allow the board discretion to extend the permissible period before occupation where the circumstances are reasonable. It is intended to deal with force majeure situations, when the intending occupier cannot get in within 12 months, through no fault of his own.

Amendment agreed to.

Amendments made:

No. 25, in page 42, line 39, leave out paragraph (b) and insert—
'(b) is in any period of fifty-two weeks comprising the time at which the interest is payable and falling wholly or partly within the year of assesssment, let at a commercial rent for more than twenty-six weeks and, when not so

let, either available for letting at such a rent or used as mentioned in paragraph (a) above or prevented from being so available or used by any works of construction or repair'.

No. 26, in page 42, line 46, at end insert—
'(2) If it appears to the Board reasonable to do so, having regard to all the circumstances of a particular case, they may direct that in relation to that case sub-paragraph (1) above shall have effect as if for the references to twelve months there were substituted references to such longer period as meets the circumstances of that case'.

No. 27, in page 42, line 53, leave out sub-paragraph (3).—[Dr. Gilbert.]

Mr. Carr: I beg to move Amendment No. 207, in page 43, line 2, after '£25,000', insert ' for 1974–75'.
When we came to consider the Government's proposal setting an upper limit of £25,000 on the value of a mortgage which would qualify for interest relief, we felt very strongly that this must not be allowed to become a fixed figure for, if not all time, at least some unknown and indefinite period, because if inflation were, unfortunately, to continue, this could well mean that the real value of the house on which mortgage interest was allowed would be declining from year to year. We therefore passed an amendment in Standing Committee which involved an automatic indexing.
In commenting in Standing Committee at that time, I said on behalf of the Opposition—although I also said at the time that I might not carry all my hon. Friends with me—that while I and the Opposition Front Bench felt strongly determined to make sure that this £25,000 was not just lost in limbo, I felt that the retail price index was of at least doubtful merit as to automatic index linking. I said that unless or until we could find some automatic index which would be more satisfactory for this purpose, I would seek to move an amendment on Report which would remove the automatic linkage to the RPI but would ensure that the Government of the day, as with corporation tax, for example, would have to come forward every year in the Finance Bill saying what the value should be for that year. That would, therefore, ensure that every year this consideration took place in public in the House of Commons and that the figure could be amended if it were the desire of the House.
This seems to have the added advantage that unless or until we find some index which seems to be more satisfactory than the RPI, it should be possible for the House of Commons every year to take account of not only the movement in the value of money generally but the movement in other things, such as property values, obviously, and even earnings, and this sort of consideration.
Therefore, I believe that this is the sounder way for us to proceed. It does ensure what above all we started to seek to ensure—namely, that this figure of £25,000 will have to be openly reviewed by Parliament every year and Parliament will have the opportunity to change it. That is the reason for the amendment.

Dr. Gilbert: As the right hon. Gentleman will recall, we made it perfectly clear in Standing Committee that it was never our intention that the £25,000 figure should stand for all time in the Bill. It would be unrealistic ever to intend that. I agree that the amendment—which in turn gives rise to the amendment we shall be debating next—is a less than satisfactory way of dealing with the matter.
As to the £25,000 limit, I have no difficulty in accepting the right hon. Gentleman's amendment, No. 207. I made it clear to him in Standing Committee that the Government would renew it and look at it every year, of course, as part of the budgetary process. I think that I also made it clear to him that there was no diminution of parliamentary control in the way we had it in the Bill because it was always open to Parliament on every Finance Bill to seek to change the figure, which would have had the effect of reducing taxation. I do not seek to debate this minor point with the right hon. Gentleman. I am happy to accept the amendment.

Mr. Nigel Lawson: The hon. Gentleman has said that it is not the Government's intention that this figure or anything like it should stand for all time. That is an important statement. Will he confirm that there has been a change in the Government's position since the Budget Statement, when the Chancellor specifically and explicitly said that it was his intention that the £25,000 should stay fixed for a considerable period?

Dr. Gilbert: There is the world of difference between "a considerable period" and "all time". I should have thought that that was obvious.

Mr. Ridley: I am not terribly happy about the social compact which has been arrived at between the two Front Benches. There was a feeling in Standing Committee that it was not entirely wise to trust Governments to review a limit such as this every year and that they might not be prepared to come up with a new figure every year which would be more realistic in terms of the change in the value of money.
Nobody will say that £25,000 is necessarily the right limit to start with. It might be said that it should be higher or that it should be lower. Granted that we have that figure, we should build into our legislation measures for reviewing it annually and bringing it up to its old value in real terms.
The question which the House must consider is whether the more effective way of updating the value from £25,000 to whatever it should be in the future depending upon the rate of inflation is to link it to some index or to leave it to the Government. If we were talking about pensions or unemployment pay, I have no doubt that the Government would not only bring it up to the new value but would increase it still further, because there are votes in doing that. However, there are no votes in increasing the £25,000.
One of the troubles about inflation is that those who carry the least voting power tend to get the worst treatment. I am certain that the amendment is no guarantee that the limit will ever be looked at again. It is frightening how the limits in taxation—the figures built into our fiscal legislation—have been allowed to stand as money values fall and the currency is eroded and how people are increasingly being taxed and treated badly through inflation because they have not got the popular steam to engender the political power to have the limits changed.
This was the first instance of indexing which was ever put into any Bill. I was glad that the amendment I moved in Committee was accepted to index the figure to £25,000. That seemed to be a precedent that perhaps those who suffer


from the fact that they do not have great political power and influence would be protected by further indexing measures of this sort.
I find it difficult to rest my trust in the word of future Treasury Ministers that they will review the figure at later periods. They could review it and say, "We have reviewed it and it should go up from £25,000 to £26,000." That is not the same thing as accepting the principle that figures such as this should be automatically inflation-proofed, should be protected against the erosion in the value of money, not through the benevolence of Treasury Ministers, but through the automatic operation of some clause.
Although I understand the technical difficulties about the retail price index and other problems, it is the best index we have. Indeed, it is the only index we have. It is wrong for the House to withdraw the indexation of the £25,000 without there being some further probing of the Government, and the Financial Secretary saying what he means by an annual review. It is not as if he has offered Amendment No. 79. It is an Opposition amendment that he has graciously accepted, but what would be his attitude if he were Financial Secretary a year from now? Would he uprate the £25,000 to take account of the fall in the value of money? Is the obligation to review in the next Budget in his estimation an obligation to substitute for £25,000 a figure which would fully compensate for the fall in the value of money at that time? If he intends merely to have a look at the matter but to care nothing for the people who can afford a £25,000 mortgage and to do nothing about it, then the amendment is meaningless. If the review means trying to devise a figure which takes account of the change in the value of money, the rate of inflation and the movement in house prices, a realistic figure, then we can at least argue whether he has reached the correct figure. That would be meaningful.
11.15 p.m.
We want to be assured that in the conditions ahead, which will be chaotic, and in which hyper-inflation is now all too likely because of Government policy, there will be some protection for the silent minority who will get trampled

underfoot by the fall in the value of money unless we take precautions. Therefore I am not prepared to rest on the short speech the Financial Secretary made in accepting the amendment. I want to know what he intends by "review". Does he intend to try to bring the figure back to its full true value, or does he intend to go through a meaningless, formal process under which he says that he has reviewed it and has decided to do nothing?

Mr. Pardoe: The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) and I put our names jointly to the amendment which the Committee in its wisdom passed. It dealt with indexation, and I am not arguing here for a total commitment to indexation at every stage of the economy. We must, however, begin to make progress on indexation and we should start with taxation. I was therefore glad that the Committee accepted and passed the amendment.

Mr. Nigel Lawson: On a point of order, Mr. Deputy Speaker. Which amendment are we debating?

Mr. Deputy Speaker: Amendment No. 207.

Mr. Pardoe: The Opposition amendment which the Government have now accepted is palpably an attempt to get the Opposition Front Bench off the hook on which they impaled themselves in Committee—perhaps unintentionally—and they do not seem to have been very successful. I am sorry that the Opposition have resorted to this proposal because they would have done better to have stuck to the original amendment.
I do not understand the reasons put forward by the right hon. Member for Carshalton (Mr. Carr) for opposing the RPI, because unless we use something like the RPI we have no means of distributing resources within the economy. The hon. Member for Luton, West (Mr. Sedgemore) stated in a debate on an earlier amendment what he believed would happen if the price of houses fell and the retail price index rose. That is one reason for using the RPI because if house prices fell it would signify that houses had become more plentiful in relation to other things to which we would have to allocate resources. Therefore, I do not know what alternative we


have to using the RPI. I do not believe that gold bars, SDRs or even the price of bricks would do. It would be far better to stick to the amendment we passed in Committee and not have this subterfuge to get the Conservative Front Bench off the hook.
I hope that eventually one Government or the other will accept the principle of full-scale indexation, and then there will be no need for what is palpably a device, because the House can always review a tax rate in any Session. Therefore, I do not think that the amendment says anything, but I accept that it is a good excuse to avoid a vote tonight.

Mr. Carr: I am grateful to the Financial Secretary for accepting the amendment. I would say to the hon. Member for Cornwall, North (Mr. Pardoe) that if it had not been necessary for Governments every year to deal with the rate of income tax, for example, to say nothing of corporation tax, I cannot help thinking that there would have been fewer reductions of tax. The fact that a value must be set every year and come before the House ensures that it is not reviewed behind closed doors. The chance to amend is real.
If by some malchance the present Chancellor and his hon. Friends should find themselves dealing with the Finance Bill next year, it will not be good enough for them to refer back to what the right hon. Gentleman said in his Budget speech on 26th March. It will not be good enough to say that he hoped he had fixed the value at £25,000 for at least a considerable time. If we are unfortunately in Opposition, we shall bring the pressure of Parliament to bear to see that the value is changed to meet changes in the value of property and of money.

Dr. Gilbert: I am grateful for what the right hon. Gentleman has said.
I feel that I should respond to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), although some of his remarks were directed to the next debate. Obviously, considerations involved would be movements in the level of house prices and incomes, and would include the overall structure of tax reliefs for house purchase, taken in the whole context of assistance to the public in the acquisition of housing, whether rented or otherwise.
The hon. Gentleman said that if there were a change in the figure the new figure could be subject to scrutiny by the House and the Committee if they considered that appropriate. Equally, if there is no change that can be considered. House prices could fall. I am told that they have levelled off, and that there have been slight falls of 1 per cent. or so in certain parts of the country. I do not think that the figure is likely to fall, but it is theoretically conceivable.

Mr. Ridley: It is not a question of house prices; it is a question of the value of money. Is the hon. Gentleman honestly suggesting that the value of money could be stable or could even increase in the foreseeable future? Such a suggestion would clearly be rubbish. If we are to go on the indexing principle, we shall have to have a change next year, probably to about £30,000 at the rate the Government are presently inflating the economy.
This is a serious and important point. For the hon. Gentleman to say that if there is no change in the figure the House can debate the matter is for him to say "I am preparing to mislead the House in this debate. I have no intention of doing anything about the figure next year, because I have decided that I do not want to do anything about it."
We want the hon. Gentleman to acknowledge that rampant inflation exists and to say that he will put the figure right every year. Otherwise, I shall have to insist on voting against the next amendment to remove sub-paragraph (2).

Dr. Gilbert: I was talking in terms not of next year but of a whole series of years, in regard to the general principle of review in the Budgetary process. The hon. Gentleman is well aware of what I was saying. I do not want to bring the debate to the level of scoring points on who is responsible for inflation, although the hon. Gentleman tempts me. The hon. Gentleman should bear in mind some of the antics of his right hon. and hon. Friends, particularly those of yesterday relating to the public sector borrowing requirements, before making remarks of that sort.
It is clear from what I have said that my right hon. Friend will consider the whole gamut of economic factors connected with relative house prices and the value of money. A change in house prices


is normally a most significant factor. I should have thought that that would be self-evident.

Amendment agreed to.

Dr. Gilbert: I beg to move Amendment No. 28, in page 43, line 15, leave out sub-paragraph (2).
This amendment is designed to remove from the Bill the requirement inserted by Amendment No. 45 of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) in Standing Committee, the effect of which was to increase the value of the £25,000 ceiling every six months in line with the Retail Price Index—

Mr. Nigel Lawson: rose—

Dr. Gilbert: I will not give way.

Mr. Nigel Lawson: On a point of order, Mr. Deputy Speaker. The Bill is printed, in a manner of speaking, and the hon. Gentleman has misquoted it.

Mr. Deputy Speaker: The Financial Secretary must be allowed to move his amendment. Dr. Gilbert.

Dr. Gilbert: I am always generous in giving way to hon. Members, but occasionally the hon. Gentleman must be patient. I will give way in due course. Amendment No. 45 stated:
If at any time the official retail price index shall rise above that obtaining on 5th April 1974 the Treasury shall, by order, substitute for the amounts specified in subparagraph (1) above (£25,000) such higher amounts as shall then have the same purchasing power (calculated by reference to that index) as the corresponding amount in the above sub-paragraph had on 5th April 1974:
Provided that no order under this section shall be made before 5th October 1974 or thereafter at less than six-monthly intervals".
I should have thought that the intervals proposed in that amendment were perfectly clear.

Mr. Nigel Lawson: The amendment which the Financial Secretary has read out at no place states that there should be a review at six-monthly intervals. It refers to not less than six-monthly inter-

vals. It was not the intention of those of us on this side who supported that amendment that the period should be one of six-monthly intervals. We would consider annual intervals more appropriate.

Dr. Gilbert: If the hon. Gentleman concedes that an annual review is more appropriate it is extraordinary that that suggestion did not appear in the amendment or in the reports of debates in Committee.

Mr. Pardoe: The whole point about the six months is that if an annual review had been suggested it would have been out of order because we do review things annually anyway. Has the hon. Gentleman not taken that on board?

11.30 p.m.

Dr. Gilbert: Of course we review things annually. That was why I accepted Amendment No. 207. The hon. Gentleman was not listening very closely to the last debate. I am glad to have it confirmed that the hon. Member for Blaby (Mr. Lawson) is no longer seeking to rest upon a six-monthly review. [Interruption.] The hon. Gentleman disagrees? It is very confusing knowing what the hon. Gentleman has in mind. I will leave it to the hon. Gentleman to explain to the House. I have no intention of putting words into his mouth. No doubt he will do so at his usual length and with his usual eloquence.
For reasons we went into in considerable detail in Committee I am unable to recommend the House to accept the effect of the amendment moved in Committee by the hon. Member for Cirencester and Tewkesbury. We went into the reasons a few minutes ago when debating Amendment No. 207. The right hon. Member for Carshalton (Mr. Carr) agreed then that that was the better way of doing things and the hon. Member's way was inappropriate.

Question put, That the amendment be made:—

The House divided: Ayes 102, Noes 29.

Division No. 91.]
AYES
[11.32 p.m.


Abse, Leo
Bishop, E. S.
Cohen, Stanley


Ashton, Joe
Boardman, H.
Coleman, Donald


Atkinson, Norman
Broughton, Sir Alfred
Conlan, Bernard


Bagier, Gordon, A. T.
Brown, Bob (Newcastle upon Tyne, W.)
Cook, Robert F. (Edinburgh, C.)


Barnett, Joel (Heywood &amp; Royton)
Carter-Jones, Lewis
Cox, Thomas


Bates, Alf
Castle, Rt. Hn. Barbara
Davidson, Arthur


Benn, Rt. Hn. Anthony Wedgwood
Cocks, Michael
Davies Ifor (Gower)




Dean, Joseph (Leeds, W.)
Kerr, Russell
Pendry, Tom


Douglas-Mann, Bruce
Kinnock, Neil
Perry, Ernest G.


Duffy, A. E. P.
Lambie, David
Prescott, John


Dunn, James A.
Lestor, Miss Joan (Eton &amp; Slough)
Price, William (Rugby)


English, Michael
Loyden, Eddie
Rodgers, George (Chorley)


Ennals, David
Lyons, Edward (Bradford, W.)
Rodgers, William (Teesside, St'ckton)


Evans, Fred (Caerphilly)
Mabon, Dr. J. Dickson
Ross, Rt. Hn. William (Kilmarnock)


Evans, John (Newton)
McCartney, Hugh
Sandelson, Neville


Fernyhough, Rt. Hn. E.
MacFarquhar, Roderick
Short, Rt. Hn. E. (N'ctle-u-Tyne)


Fletcher, Raymond (Ilkeston)
McGuire, Michael
Skinner, Dennis


Ford, Ben
McMillan, Tom (Glasgow, C.)
Smith, John (Lanarkshire, N.)


Fowler, Gerry (The Wrekin)
Madden, M. O. F.
Snape, Peter


Freeson, Reginald
Magee, Bryan
Stoddart, David (Swindon)


George, Bruce
Mahon, Simon
Stott, Roger


Gilbert, Dr. John
Mallalieu, J. P. W.
Summerskill, Rt. Hn. Shirley


Grant, George (Morpeth)
Mellish, Rt. Hn. Robert
Swain, Thomas


Grant, John (Islington, C.)
Millan, Bruce
Urwin, T. W.


Hamling, William
Miller, Dr. M. S. (E. Kilbride)
Wainwright, Edwin (Dearne Valley)


Hardy, Peter
Milne, Edward
Wellbeloved, James


Harper, Joseph
Mitchell, R. C. (S'hampton, Itchen)
Williams, Alan (Swansea, W.)


Harrison, Walter (Wakefield)
Molloy, William
Wise, Mrs. Audrey


Howell, Denis (B'ham, Small Heath)
Mulley, Rt. Hn. Frederick
Woodall, Alec


Huckfield, Leslie
Oakes, Gordon
Woof, Robert


Hughes, Rt. Hn. Cledwyn (Anglesey)
O'Halloran, Michael
Wrigglesworth, Ian


Hughes, Mark (Durham)
Palmer, Arthur
Young, David (Bolton, E.)


Johnson, James (K'ston upon Hull, W)
Parker, John (Dagenham)
TELLERS FOR THE AYES:


Jones, Gwynoro (Carmarthen)
Parry, Robert
Mr. John Golding and


Judd, Frank
Peart, Rt. Hn. Fred
Mr. J. D. Dormand.




NOES


Body, Richard
Lester, Jim (Beeston)
Ross, Stephen (Isle of Wig[...])


Carson, John
Lloyd, Ian (Havant &amp; Waterloo)
Scott-Hopkins, James


Churchill, W. S.
MacGregor, John
Smith, Cyril (Rochdale)


Cooke, Robert (Bristol, W.)
Mitchell, David (Basingstoke)
Thorpe, Rt. Hn. Jeremy


Cope, John
Newton, Tony (Braintree)
Wiggin, Jerry


du Cann, Rt. Hn. Edward
Nicholls, Sir Harmar
Winstanley, Dr. Michael


Durant, Tony
Normanton, Tom
Winterton, Nicholas


Hannam, John
Page, Rt. Hn. Graham (Crosby)



Howells, Geraint (Cardigan)
Page, John (Harrow, W.)
TELLERS FOR THE NOES:


King, Tom (Bridgwater)
Pardoe, John
Mr. Normao Lamont and


Lawrence, Ivan
Ridley, Hn. Nicholas
Mr. Nigel Lawson.

Question accordingly agreed to.

Amendments made: No. 29, in page 44, line 22, at end insert:
'(2) If it appears to the Board reasonable to do so, having regard to all the circumstances of a particular case, they may direct that in relation to that case sub-paragraph (1) above shall have effect as if for the reference to twelve months there were substituted a reference to such longer period as meets the circumstances of that case'.

No. 30, in page 44, line 28, after 'that', insert 'or any other'.

No. 31, in page 44, line 31, after second 'the', insert 'first-mentioned'.

No. 32, in page 44, line 33, at end insert:
'8.—(1) Where any interest paid by persons as the personal representatives of a deceased person or as trustees of a settlement made by his will would, on the assumptions required by sub-paragraph (2) below, be eligible for relief under section 75 of the Finance Act 1972 by virtue of Part I of Schedule 9 to that Act and, in a case where the condition stated in that sub-paragraph applies, that condition is satisfied, that interest shall be so eligible notwithstanding the preceding provisions of this Part of this Schedule.
(2) For the purposes of sub-paragraph (1) above it shall be assumed that the deceased

would have survived and been the borrower; and if, at his death, the land, caravan or house boat concerned was used as his only or main residence, it shall be further assumed that he would have continued so to use it and the following condition shall then apply, namely, that the land, caravan or house boat is, at the time the interest is paid, used as the only or main residence of the deceased's widow or widower or of any dependent relative of the deceased.
(3) In this paragraph "personal representatives" has the meaning assigned to it by section 432 of the Taxes Act'.

No. 33, in page 44, line 52, at end insert:
'(2) The relief referred to in sub-paragraph (1)(c) above includes any relief by virtue of section 15(4) of this Act'.

No. 34, in page 45, line 23, at the end insert:
'(2) The relief referred to in sub-paragraph (1)(c) above includes any relief by virtue of section 15(4) of this Act'.

No. 35, in page 46, line 42, at end insert:
'(2) The reference in sub-paragraph (1)(b) above to relief by virtue of this paragraph shall be construed as including any relief by virtue of section 15(4) of this Act'.

No. 105, in page 47, line 37, at end insert:

'Loan to purchase life annuity

23.—(1) Subject to the following provisions of this paragraph, interest is eligible for relief under section 75 of the Finance Act 1972 if it is interest on a loan in respect of which the following conditions are satisfied—

(a) that the loan was made as part of a scheme under which not less than nine-tenths of the proceeds of the loan were applied to the purchase by the person to whom it was made of an annuity ending with his life or with the life of the survivor of two or more persons (in this paragraph referred to as "the annuitants") who include the person to whom the loan was made;
(b) that at the time the loan was made the person to whom it was made or each of the annuitants had attained the age of sixty-five years;
(c) that the loan was secured on land in the United Kingdom or the Republic of Ireland and the person to whom it was made or one of the annuitants owns an estate or interest in that land; and
(d) that, if the loan was made after 26th March 1974, the person to whom it was made or each of the annuitants uses the land on which it was secured as his only or main residence at the time the interest is paid.

(2) Interest is not eligible for relief by virtue of this paragraph unless it is payable by the person to whom the loan was made or by one of the annuitants.

(3) If the loan was made after 26th March 1974, interest on it is eligible for relief by virtue of this paragraph only to the extent that the amount on which it is payable does not exceed £25,000; and if the interest is payable by two or more persons the interest payable by each of them is so eligible only to the extent that the amount on which it is payable does not exceed such amount as bears to £25,000 the same proportion as the interest payable by him bears to the interest payable by both or all of them'.

No. 104, in page 47, line 36, at end insert 'of the preceding provisions'.—[Dr. Gilbert.]

Amendment proposed: No. 36, in page 48, line 10, at end insert:
'at the rate at which interest on that balance was chargeable on 26th March 1974'.—[Dr. Gilbert.]

Mr. Higgins: We should be grateful if the Financial Secetary could give us some explanation of this amendment. It seems to raise a separate point of principle. I do not think that there is another amendment which relates to the actual rate of interest. It may be that I have misunderstood this rather technical point. It seems to be an innovation. I

should be grateful if the Financial Secretary could tell us exactly what it does.

Dr. Gilbert: I must admit that I am in a state of some confusion. I thought that we had taken Amendment No. 36 along with Amendment No. 11, the amendments of the right hon. Member for Carshalton (Mr. Carr), and Amendments Nos. 81, 82, 12 to 15, 23 and 33 to 37. I was under the impression that we were now to consider Amendments Nos. 34, 104 and 106. I think that you, Mr. Deputy Speaker, put Amendments Nos. 32, 105 and 104. I understood you to say that you were taking all the remaining Government amendments to Schedule I. That left outstanding Amendment No. 106 to which I was prepared to speak. I thought that we had dealt with Amendment No. 36 some time ago.

Mr. Higgins: I am not seeking to delay the House. My understanding was that you took a bunch of amendments, Mr. Deputy Speaker, which the House agreed. I understood that you suggested that Amendment No. 36 might be taken separately. If the amendment is connected with a group I would ask the Financial Secretary to refresh our memories as to precisely which group Amendment No. 36 relates. Obviously we do not want to make a mistake at this stage. A mistake could not be put right in another place. Perhaps the Financial Secretary will tell us to which group the amendment relates and what it actually does.

Dr. Gilbert: I thought that Amendment No. 36 was linked with Amendment No. 37, which was taken with the group of amendments starting with Amendment No. 11. I am now hunting for that amendment. I tend to get my papers in rather a mess—

Mr. Tom King: On a point of order, Mr. Deputy Speaker. As there is some confusion and as we are to have an extremely important Adjournment debate, would it not be for the convenience of the House to have the Adjournment debate now while the Financial Secretary sorts out his papers?

Mr. Deputy Speaker (Mr. George Thomas): That is a very good idea, but it is impracticable.

Dr. Gilbert: I can assure you, Mr. Deputy Speaker, that my colleagues and


I have had our papers properly organised for the matters that we have had to debate. We have debated Amendments Nos. 36 and 37. I spoke to them at the proper time.

Mr. Deputy Speaker: As the House will know, there have been changes in the Chair. However, I understand that Amendment No. 36 has been taken. It was read out earlier.

Mr. Higgins: rose—

Mr. Deputy Speaker: Order. I know that both sides are anxious to meet each other. Perhaps a simple, quick statement would satisfy.

11.45 p.m.

Mr. Higgins: Now that the Financial Secretary has spelt out clearly to which group Amendment No. 36 is linked, I am perfectly satisfied. I was merely anxious that the House should not make a mistake which could not be corrected in another place. I fully accept what the Financial Secretary says.

Dr. Gilbert: I am most appreciative of what the hon. Gentleman says. I recognise the difficulties under which he has to work, as indeed we all do. Have you included Amendment No. 106, Mr. Deputy Speaker, with those to Schedule 1 which it would be convenient for the House to take together?

Mr. Deputy Speaker: I understand that Amendments Nos. 36, 37 and 106 have been discussed, but will have to be moved formally.

Amendments made: No. 36, in page 48, line 10, at end insert:
'at the rate at which interest on that balance was chargeable on 26th March 1974'.

No. 37, in line 11, leave out paragraph (c) and insert:
'(c) so much of the interest paid in the year of assessment for which the claim is made as was payable after 26th March 1974 and before 6th April 1975'.

No. 106, in page 50, line 16, column 2, leave out from beginning to end of line 22 and insert:
In subsection (6) the following shall be substituted for paragraph (d):
(d) the payment of interest would, on the assumptions made below, be eligible for relief under section 75 of the Finance Act 1972 by virtue of Part I of Schedule 9 to that Act if it were made by an individual". and after that paragraph there shall be in

serted the words "For the purposes of paragraph (d) above it shall be assumed that if the land concerned is occupied by the company the conditions of paragraph 4(1) of Schedule 1 to the Finance Act 1974 are satisfied if the land either—

(i) is not used as a residence, or
(ii) is used as an individual's main or only residence;

but the limit imposed by paragraph 5 of that Schedule shall apply only in a case falling within paragraph (ii) above and shall then apply without regard to any loan made in connection with any other land.—[Dr. Gilbert.]

Further consideration of the Bill, as amended, adjourned.—[Mr. Joel Barnett.]

Bill, as amended in Committee and in Standing Committee, to be further considered tomorrow.

ADJOURNMENT

Motion made, and Question proposed, That this i-louse do now adourn.—[Mr. Golding.]

Orders of the Day — TELEVISION RECEPTION (WESTON-SUPER-MARE)

11.47 p.m.

Mr. Jerry Wiggin: By a strange coincidence, on the last occasion when I had the good fortune to have the Adjournment debate the House had been in Committee on the Finance Bill discussing indexation. Having tonight again heard a debate on that subject, I am becoming quite an expert.
Tonight we are here to discuss something of far greater immediate importance to my constituents. With due respect to you, Mr. Deputy Speaker, it concerns television reception for many of my constituents—and I hope that the Under-Secretary of State who is to reply to the debate will comment on the number—who switch on their television sets to receive current affairs programmes in English from Bristol or some other nearby locality but in fact receive programmes in Welsh from across the water. While you, Mr. Deputy Speaker, may be able to understand those programmes, I and the majority of my constituents are unable to follow them.
This is not a new problem. It has to do with the geographical location of the whole of the north coast of Somerset and Devon, parts of Cornwall and parts of


Avon. There is a relatively new and powerful transmitter known as the Mendip transmitter at Penn near Wells. It was erected to give a television service on 625 lines to a large part of the West country, but because of the topography of that area and because the siting of the aerial had to be reorganised to suit the air traffic approach to Lulsgate airport, many people are in a television shadow. This means that, to receive any service at all, they are forced to direct their aerials across the water. It may be of interest to you, Mr. Deputy Speaker, to know that many of your constituents and many others in South Wales are forced to turn their aerials to the Somerset transmitter. We therefore get a Cox and Box situation in which my constituents have to suffer from programmes in Welsh and your constituents have to take news of West country affairs from across the water.
I accept that the solution to the problem will cost some money and that the problem is not new. But all my hon. Friends who are present for this debate will agree that, far from complaints on this score reducing, they are undoubtedly increasing. The reason is that, because 405-line sets are going out of fashion, more people are buying 625-line sets only. These are the people who find themselves in a predicament. If a person spends £200 or £300 on a brand-new colour television set only to find that current affairs programmes are put out in a totally unintelligible language, it is as good as having no television set at all. If it is said that those who have no television set are worse off, then that surely is a debatable proposition because at least those with no television set have not spent money only to discover that they cannot understand what is being said.
I shall not attempt to defend the Conservative Government's attitude on this matter because they chose to protect themselves from criticisms by my hon. Friends and myself by setting up a committee—a well-established bureaucratic procedure for handling criticism. The Crawford Committee will report to the House this summer. I sent evidence to the committee and encouraged constituents to do likewise. One hopes that when the committee reports, it will come to the conclusion that some element of priority for the north

coast of Somerset, Avon and Devon is of crucial importance. However, this is no reason why we in this House should not debate the matter and constantly bring it to the attention of the Government of the day.
My hon. Friend the Member for Somerset, North (Mr. Dean) and I persuaded the British Broadcasting Corporation in 1972, after correspondence lasting for over two years, to produce an excellent leaflet which explained the problem to our constituents. Some 3,000 copies of that leaflet were printed. I am not sure that it was greeted with the thanks that were due, but its message certainly was helpful to some people.
I must make clear that it is not only hon. Members who have been raising this subject. The Welsh Division of the IBA produced in January 1973 a well-argued document suggesting that at least a temporary solution to the problem would be to allow the fourth channel at Wenvoe to be used for the purpose of transmitting BBC, Westward Television and Harlech West from that transmitter as a temporary operation. So reluctant were the Government of the day to do this that nothing was done. That solution would solve the problem temporarily.
Similarly, the fourth channel at Penn could be used to transmit Welsh programmes to Cardiff and surrounding areas if there is a demand for Welsh programmes there—which I tend to doubt. With respect to you, Mr. Deputy Speaker, since only 25 per cent. of the Welsh people are familiar with the Welsh language, it is an anachronism that programmes at peak viewing hours should be put out—at considerable public expense—which are not understood by people in my constituency or by the people to whom the programmes are directed. I fail to understand how this is allowed to happen.
I would not have raised this matter tonight if it had not been for the fact that there has been a recent round of correspondence that brings into play a completely new set of arguments. There has been a series of letters, some of which I shall quote to the House.
Early in March, I wrote to the BBC, and I received a courteous reply from the


Head of the Engineering Information Department which read, in part:
So far we have planned a total of eight relay stations for the Mendip transmitter, four of which have been completed … but we have a further difficulty in that it now seems unlikely that it will be possible to complete the coverage of the Somerset area until the Government is able to make available additional frequency space in the UHF band. You may recall that this problem was mentioned in our correspondence as long ago as 1971 and the shortage of suitable channels in the Bristol Channel area is now particularly acute. We have already had discussions with the Ministry of Posts and Telecommunications (as it was under the last Government) and we hope that it will he found possible to make additional frequencies available, although so far we have had no definite information about this.
After an exchange of letters, this was confirmed in a further letter dated 10th April:
Since it now seems that the allocation of additional wavelengths will be crucial to the practicability of stations in the area, the importance of this point has been emphasised in our submissions to the Crawford Committee.
Then I was amazed to receive a letter from the noble Lord, Lord Harris, Minister of State, Home Office, and now responsible for these matters. He wrote on 23rd April:
There is no denying that frequencies are in short supply but this is not the main criterion why these viewers will have to depend on the Wenvoe transmissions for some time yet.
So we have the BBC, out of the blue, suddenly producing a new excuse on wavelengths, and the Home Office denying that this is the real reason.
This is just stalling. We have been complaining about this problem for five years or more. The truth is that nothing has been done to relieve my constituents of their problem. Therefore I feel it only right to raise it once again tonight, hoping that something can be done. It is not complicated. It is not technically impossible. It is easily understood, and it could be carried out in the very near future.

Several Hon. Members: rose—

Mr. Deputy Speaker (Mr. George Thomas): Order. I understand that the Minister and the hon. Member for Weston-super-Mare (Mr. Wiggin) have agreed that three hon. Members should intervene. Mr. Dean.

11.57 p.m.

Mr. Paul Dean: I wish to add briefly to what my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin) has said. This is a very irritating situation which has existed for many years now, and it gets worse as technical advance improves.
As my hon. Friend said, it means that some of the key programmes in the northern part of Somerset—and further south, too—can be received only in the Welsh language about Wales, when people on our side of the channel wish to have local news in English about matters concerning our side of the channel.
I hope that the Minister will not say that this is only a very limited number of hours per week. My point is that it is the key local programmes about local news which we cannot receive, and it is largely for this reason that the pressure for some improvement is so strong.
When the Crawford Committee was set up, I asked my constituents to write to me giving their reactions. I had a larger mail bag, which I sent on to the Crawford Committee, on this subject than on almost any other—rates apart—in the past few months. I hope that the hon. Lady will say when we are likely to receive the Crawford Report, and what the response will be.
In taking up the general points which my hon. Friend made, my main argument is that it must be right that, before other parts of the country have another choice of programmes, we should have one effective programme which gives us the local news and programmes that we need.
I admit that the booster stations which have been opened—one or two in recent times—have improved the situation in some parts of our constituencies. Certainly one or two parts of my own constituency can now receive the English programmes. I welcome the progress which has been made. But, whatever else the hon. Lady may not say tonight, I hope that she will agree at least that any further improvements which can be made, with new channels being brought about or anything which comes out of the Crawford Committee, will ensure that minority areas such as ours which at the moment do not have an effective


service, although they have to pay the price for the service provided elsewhere, will have the first priority in terms of new channels and resources as they become available for television services as a whole.

12 midnight.

Mr. Edward du Cann: I congratulate my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin) on the initiative that he has shown and the skill with which he deployed his argument. I also agree with what was said by my hon. Friend the Member for Somerset, North (Mr. Dean).
I quarrel with my hon. Friend the Member for Weston-super-Mare to the extent that the title of the debate is local. This is not a local problem. It is a matter of general interest which affects the whole of the West country.
The problem is related not only to the reception of programmes continuously, with respect to you, Mr. Deputy Speaker, and your compatriots, in Welsh, but to the fact that we get very little attention in matters of local presentation at a time when many of us deplore the dearth of local patriotism and wish to see local feelings, aspirations and interests enhanced.
The matter concerns not only television, but radio. We in the West country pay full licence fees—I speak of the West country as the counties of Somerset, Devon and Cornwall—and get a service in terms of both radio and television which is markedly inferior.
The situation is analogous with the position on rates. In Somerset, at any rate, we are intolerably angry at the way that we have been treated. We pay high rates and get an inferior service.
There is a second analogy with the rating problem. What do successive Governments do when the citizenry have justified a logical complaint? They establish inquiries. My hon. Friend the Member for Weston-super-Mare referred to the Crawford Committee inquiry. The report has been promised at various times. It is now promised for the late summer.
I should like to ask the Under-Secretary of State, whose presence we welcome and value, two questions. First, will she indicate precisely when she thinks that the report will be available? Secondly,

if she is able to do so, will she give an undertaking now that the complaints that we have made over a number of years will be most carefully and sympathetically considered in the sense not merely of being noted but that, having been heard, action will at last be taken upon them?

12.3 a.m.

Mr. Tom King: I know that my hon. Friends will wish to share the appreciation expressed by my right hon. Friend the Member for Taunton (Mr. du Cann) of the Minister's presence this evening. The hon. Lady will recognise that our numbers indicate the strength of feeling on this issue. The fact that we have our arguments a little better marshalled than on some of the earlier business today indicates that this is a subject with which we are extremely familiar.
I hasten to add, because at this late hour we would not want to fall from your favour, Mr. Deputy Speaker, that this is in no sense an attack on the Welsh. I understand that they suffer from the same problem in reverse. My hon. Friend the Member for Weston-super-Mare (Mr. Wiggin) said that there are parallel problems, so there are a surprising number of people affected by this issue.
This is a worrying problem. I have been involved with it, as have my hon. Friends, for a considerable time. It is extremely difficult to pin down the problems. At the moment they are buried under the Crawford Committee, which is a convenient excuse for temporising on this problem. I join my right hon. and hon. Friends in asking when the committee will report. We are told that the report will be received in the summer. I hasten to suggest that summer is a-coming in or has been a-coming in for a hale while now. Therefore, what about that report?
The complications that we face concern not only coverage but programme content. I have had reports of constituents who watch serial programmes, of which they have seen perhaps three episodes on one particular wavelength, finding that Welsh programmes are substituted for later episodes. That sort of thing is enormously provoking and irritating.
The problem is also more serious than that. My hon. Friend referred to the


switch from 405 to 625 lines because people choose to buy more advanced sets. The problem is more serious. As 625 line transmission is progressively introduced, eventually all 405-line transmission will be totally phased out. Then the problem will be much more acute. It is a less flexible system. The wavelengths are less prone to follow the contours of the land. Therefore the shadows my hon. Friend referred to will become that much more substantial. For that reason the problem is all the more urgent
I would quote what my right hon. Friend said to the hon. Lady. It is easy to be shuffled around on this problem. One is shuffled from the Home Office—it used to be the Ministry for Posts and Telecommunications—to the BBC and to the ITA and their joint responsibility for transmissions. There are problems of programme content. There are a number of different aspects. One does not have to declare an interest. People in the Principality also face this problem. Assuring the hon. Lady of the number of hon. Members and their constituents who are affected, could I ask her to take a real interest in this problem and to try to help us to find our way through the maze of technical and other confusions and see whether we could find a solution to this problem?

12.6 a.m.

The Under-Secretary of State for the Home Department (Dr. Shirley Summerskill): The hon. Member for Weston-super-Mare (Mr. Wiggin) is right to have secured time for the opportunity of referring to the dissatisfaction of those of his constituents who can receive only television services with a Welsh content rather than wholly English services. In spite of the fact that my father, like you, Mr. Deputy Speaker, is a Welshman who was born in Llanelly, and is Welsh-speaking as well as English-speaking, I can assure the House that I can look at this subject completely objectively and dispassionately.
The hon. Member for Weston-super-Mare has raised this matter before in the House. I recall his remarks and those of other hon. Members during the debate in December 1972 when the House was discussing broadcasting services in the West country. That debate was in the main about radio services but the hon. Member devoted his contribution on the

occasion exclusively to the subject of television. Because of his persistence it is perhaps relevant to touch briefly on the sequence of events that is the subject of the hon. Member's complaint.
Originally the now obsolescent services of BBC 1 and ITV were transmitted in VHF with no language differentiation from stations in South Wales which served both sides of the Bristol Channel. In 1962 the Pilkington Committee recommended that a separate Welsh service was necessary if the distinctive Welsh culture and in particular the Welsh language were to survive. In implementing that recommendation the BBC and the ITV services to Wales were separated from the English regions, and from that time all stations in Wales, both VHF and UHF, were and continue to be designed to carry programmes that cater specifically for the interests of the people in Wales. The Welsh regional UHF service started in Wenvoe in April 1970 and an English service at Mendip in May 1970.
The nub of the problem so far as the hon. Member's constituents are concerned is that they cannot receive the English regional television service because some areas on the south side of the Bristol Channel are screened from the Mendip transmitter. Those viewers are nevertheless able to receive a Welsh regional station but some of them in the areas between Bristol and Ilfracombe have complained about receiving the Welsh programmes instead of the English service. These Welsh programmes are not designed for them but radio waves cannot be stopped at an arbitrary boundary.
Nevertheless, they are getting a colour service. Several hon. Members whose interests lie in their constituents obtaining a colour service where none at all exists—many are pressing hard for this—have questioned whether it was right to provide additional services for those who could, after all, get a service. Some parts of the South-West are still waiting for relay stations to bring colour television to their areas.
This subject was raised when the House debated the Report of the Select Committee on Nationalised Industries on the Independent Broadcasting Authority. That was when the Minister for Posts and Telecommunications in the previous Government announced that matters of


this kind would be included in the remit to a committee which that Government were about to set up. That committee, the Committee on Broadcasting Coverage under Sir Stewart Crawford, is not an excuse for inertia by the Government. The Home Secretary expects to have its report during this summer. There is no question of delay. That has always been the time when it was to report. This is a consistent policy. This important committee was set up with a specific remit to comment on coverage priorities, and that takes in everything said tonight.
The committee will also report on something which has not been mentioned tonight—the desirability of bringing the fourth television channel into use in Wales to carry the Welsh language broadcasts. These important matters, therefore, have been and are being actively discussed by the Crawford Committee. I can give every assurance that the Government will pay the closest attention and attach the greatest importance to its decisions.

Mr. Tom King: We are now in mid-July. Cannot the hon. Lady give a clearer indication of when the report will be available? Will it be within a month?

Dr. Summerskill: I should not like to give a date. I can say that it will be during the summer. I made inquiries before the debate and have no reason to alter that estimate, which has been the estimate all along.
Meanwhile, it is difficult to assess the relative importance of the hon. Member's complaint, because this is one of a number of matters involving priorities. Other hon. Members have their own priorities about television in their areas, which we obviously have to take into consideration. With remarkable speed, the BBC and the IBA have built and commissioned transmitting stations which now provide a choice of three colour television services to 94 per cent. of the population of the United Kingdom.
That still leaves them with a major problem, because there remain about 4 million people without this choice of programmes and who do not get BBC 2. Those people live in the thinly-populated rural areas of England, Scotland and

Wales and in the troubled areas of Northern Ireland. A large number—nearly 300—of transmitting stations will have to be built and even these will not provide all three services for every twine. However one looks at it, therefore, high priority should surely be given to the extension of services to those people At the present rate of progress that may take until 1980.
By comparison, the constituents of hon. Members opposite have a choice of three programmes. It is true that two of the three carry a proportion of Welsh language programmes, which viewers do not want or understand, or both. One programme, BBC 2, is completely national in character. Its content as transmitted in Wales is the same as transmitted in England. Viewers can, presumably, have no complaint there.

Mr. Wiggin: I entirely accept that point. However, does the hon. Lady realise that her important comments tonight will not be seen and heard by tens of thousands of people who want to hear them simply because the Cardiff station is not interested in this Adjournment debate? This is the sort of problem which faces us almost daily.

Dr. Summerskill: I am not denying anything that the hon. Gentleman said. I am sure that the Crawford Collimate: is taking this matter into close consideration.
Of the other two programmes, BBC Wales contains seven hours a week of Welsh language programmes and five hours of English language programmes of special interest for Wales. For the rest of the time, amounting to 83 hours a week, the programmes on BBC Wales are the same as those carried on BBC I in English. The pattern of the ITV programme which is the Welsh version of Harlech Television is similar. It contains six hours of Welsh language programmes, five hours of English langage programmes of particular interest for Wales and 80 hours of English language programmes which are transmitted to the English listeners to HTV.
More precisely, the background is this. Some 20,000 viewers in the hon. Gentleman's constituency are getting the choice of three television programmes, all in


colour, of which a very small proportion are either in Welsh or in English but specifically for Welsh viewers.
The Crawford Committee is weighing this up with the 4 million people who have only two channels in black and white, and no third channel. One has, therefore, the choice of building additional stations in Somerset, which would largely duplicate the services already

available there, and stopping the building of stations where there is no service—

The Question having been proposed after Ten o'clock on Wednesday evening and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at seventeen minutes past Twelve o'clock.